Investors interested in stocks from the Medical - Biomedical and Genetics sector have probably already heard of Regeneron (REGN) and Illumina (ILMN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Regeneron has a Zacks Rank of #1 (Strong Buy), while Illumina has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that REGN likely has seen a stronger improvement to its earnings outlook than ILMN has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
REGN currently has a forward P/E ratio of 17.17, while ILMN has a forward P/E of 30.42. We also note that REGN has a PEG ratio of 1.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ILMN currently has a PEG ratio of 2.56.
Another notable valuation metric for REGN is its P/B ratio of 2.56. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ILMN has a P/B of 9.88.
These metrics, and several others, help REGN earn a Value grade of B, while ILMN has been given a Value grade of C.
REGN has seen stronger estimate revision activity and sports more attractive valuation metrics than ILMN, so it seems like value investors will conclude that REGN is the superior option right now.
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Free: See Our Top Stock And 4 Runners UpRegeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report
Illumina, Inc. (ILMN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
