JAZZ vs. CTLT: Which Stock Is the Better Value Option?

Investors interested in stocks from the Medical - Drugs sector have probably already heard of Jazz Pharmaceuticals (JAZZ) and Catalent (CTLT). 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.

Currently, both Jazz Pharmaceuticals and Catalent are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

JAZZ currently has a forward P/E ratio of 8.46, while CTLT has a forward P/E of 26.56. We also note that JAZZ has a PEG ratio of 0.94. 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. CTLT currently has a PEG ratio of 2.35.

Another notable valuation metric for JAZZ is its P/B ratio of 2.41. 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, CTLT has a P/B of 4.57.

These are just a few of the metrics contributing to JAZZ's Value grade of A and CTLT's Value grade of C.

Both JAZZ and CTLT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that JAZZ is the superior value 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
 
Jazz Pharmaceuticals PLC (JAZZ) : Free Stock Analysis Report
 
Catalent, Inc. (CTLT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research