In This Article:
Investors interested in stocks from the Medical - Drugs sector have probably already heard of Takeda Pharmaceutical Co. (TAK) and Daiichi Sankyo Co., Ltd. - Sponsored ADR (DSNKY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Takeda Pharmaceutical Co. has a Zacks Rank of #2 (Buy), while Daiichi Sankyo Co., Ltd. - Sponsored ADR has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TAK is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
TAK currently has a forward P/E ratio of 8.93, while DSNKY has a forward P/E of 24.08. We also note that TAK has a PEG ratio of 0.25. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DSNKY currently has a PEG ratio of 1.39.
Another notable valuation metric for TAK is its P/B ratio of 0.98. 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, DSNKY has a P/B of 4.49.
These are just a few of the metrics contributing to TAK's Value grade of A and DSNKY's Value grade of C.
TAK has seen stronger estimate revision activity and sports more attractive valuation metrics than DSNKY, so it seems like value investors will conclude that TAK is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Takeda Pharmaceutical Co. (TAK) : Free Stock Analysis Report