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Investors looking for stocks in the Medical - Drugs sector might want to consider either Collegium Pharmaceutical (COLL) or Neurocrine Biosciences (NBIX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, Collegium Pharmaceutical has a Zacks Rank of #2 (Buy), while Neurocrine Biosciences has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that COLL has an improving earnings outlook. 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.
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.
COLL currently has a forward P/E ratio of 7.46, while NBIX has a forward P/E of 25.09. We also note that COLL has a PEG ratio of 0.37. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NBIX currently has a PEG ratio of 1.05.
Another notable valuation metric for COLL is its P/B ratio of 7.49. 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, NBIX has a P/B of 12.79.
These are just a few of the metrics contributing to COLL's Value grade of A and NBIX's Value grade of C.
COLL has seen stronger estimate revision activity and sports more attractive valuation metrics than NBIX, so it seems like value investors will conclude that COLL is the superior option right now.
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