Investors interested in Large Cap Pharmaceuticals stocks are likely familiar with Novartis (NVS) and Roche Holding AG (RHHBY). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Novartis is sporting a Zacks Rank of #2 (Buy), while Roche Holding AG has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that NVS likely has seen a stronger improvement to its earnings outlook than RHHBY has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
NVS currently has a forward P/E ratio of 12.57, while RHHBY has a forward P/E of 15.59. We also note that NVS has a PEG ratio of 2.15. 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. RHHBY currently has a PEG ratio of 2.36.
Another notable valuation metric for NVS is its P/B ratio of 2.68. 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, RHHBY has a P/B of 9.19.
These are just a few of the metrics contributing to NVS's Value grade of A and RHHBY's Value grade of C.
NVS has seen stronger estimate revision activity and sports more attractive valuation metrics than RHHBY, so it seems like value investors will conclude that NVS is the superior option right now.
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Novartis AG (NVS) : Free Stock Analysis Report
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