Investors looking for stocks in the Large Cap Pharmaceuticals sector might want to consider either Sanofi (SNY) or Eli Lilly (LLY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Sanofi has a Zacks Rank of #2 (Buy), while Eli Lilly has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SNY likely has seen a stronger improvement to its earnings outlook than LLY has recently. But this is just one piece of the puzzle 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.
SNY currently has a forward P/E ratio of 11.88, while LLY has a forward P/E of 46.35. We also note that SNY has a PEG ratio of 1.74. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LLY currently has a PEG ratio of 2.19.
Another notable valuation metric for SNY is its P/B ratio of 1.70. 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, LLY has a P/B of 33.97.
These metrics, and several others, help SNY earn a Value grade of A, while LLY has been given a Value grade of C.
SNY sticks out from LLY in both our Zacks Rank and Style Scores models, so value investors will likely feel that SNY is the better option right now.
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