Investors interested in stocks from the Medical – Biomedical and Genetics sector have probably already heard of Amgen (AMGN) and Illumina (ILMN). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.
Amgen and Illumina are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle 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 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.
AMGN currently has a forward P/E ratio of 13.51, while ILMN has a forward P/E of 56.69. We also note that AMGN has a PEG ratio of 2.29. 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. ILMN currently has a PEG ratio of 2.94.
Another notable valuation metric for AMGN is its P/B ratio of 7.82. 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 13.18.
These metrics, and several others, help AMGN earn a Value grade of B, while ILMN has been given a Value grade of D.
Both AMGN and ILMN are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AMGN is the superior value option right now.
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