Investors interested in stocks from the Medical – Biomedical and Genetics sector have probably already heard of OSMOTICA PHARM (OSMT) and Illumina (ILMN). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
OSMOTICA PHARM and Illumina are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that OSMT is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
OSMT currently has a forward P/E ratio of 11.75, while ILMN has a forward P/E of 51.15. We also note that OSMT has a PEG ratio of 1.17. 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. ILMN currently has a PEG ratio of 2.44.
Another notable valuation metric for OSMT is its P/B ratio of 2.73. 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, ILMN has a P/B of 10.93.
These are just a few of the metrics contributing to OSMT’s Value grade of A and ILMN’s Value grade of D.
OSMT has seen stronger estimate revision activity and sports more attractive valuation metrics than ILMN, so it seems like value investors will conclude that OSMT is the superior option right now.
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