Should Value Investors Buy Jazz Pharmaceuticals (JAZZ) Stock?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
Jazz Pharmaceuticals (JAZZ) is a stock many investors are watching right now. JAZZ is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 8.44, which compares to its industry's average of 24.88. Over the past year, JAZZ's Forward P/E has been as high as 10.99 and as low as 7.02, with a median of 8.62.
We also note that JAZZ holds a PEG ratio of 0.93. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. JAZZ's PEG compares to its industry's average PEG of 2.14. JAZZ's PEG has been as high as 1.35 and as low as 0.61, with a median of 0.86, all within the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. JAZZ has a P/S ratio of 4.06. This compares to its industry's average P/S of 6.09.
Finally, we should also recognize that JAZZ has a P/CF ratio of 9.37. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. JAZZ's P/CF compares to its industry's average P/CF of 14.48. Within the past 12 months, JAZZ's P/CF has been as high as 12.20 and as low as 7.53, with a median of 10.48.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Jazz Pharmaceuticals is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, JAZZ feels like a great value stock at the moment.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.