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Investors interested in stocks from the Medical - Drugs sector have probably already heard of Grifols (GRFS) and Neurocrine Biosciences (NBIX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Grifols and Neurocrine Biosciences are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that GRFS likely has seen a stronger improvement to its earnings outlook than NBIX has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
GRFS currently has a forward P/E ratio of 7.65, while NBIX has a forward P/E of 31.35. We also note that GRFS has a PEG ratio of 0.26. 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. NBIX currently has a PEG ratio of 1.22.
Another notable valuation metric for GRFS is its P/B ratio of 0.60. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NBIX has a P/B of 4.63.
Based on these metrics and many more, GRFS holds a Value grade of A, while NBIX has a Value grade of C.
GRFS stands above NBIX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GRFS is the superior value option right now.
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Grifols, S.A. (GRFS) : Free Stock Analysis Report
Neurocrine Biosciences, Inc. (NBIX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).