Investors looking for stocks in the Medical - Biomedical and Genetics sector might want to consider either BioMarin Pharmaceutical (BMRN) or Illumina (ILMN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
BioMarin Pharmaceutical and Illumina are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BMRN currently has a forward P/E ratio of 14.02, while ILMN has a forward P/E of 36.10. We also note that BMRN has a PEG ratio of 0.41. 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 2.72.
Another notable valuation metric for BMRN is its P/B ratio of 2.13. 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, ILMN has a P/B of 10.26.
These metrics, and several others, help BMRN earn a Value grade of B, while ILMN has been given a Value grade of C.
Both BMRN and ILMN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BMRN is the superior value option right now.
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