Investors with an interest in Medical - Biomedical and Genetics stocks have likely encountered both Harmony Biosciences Holdings, Inc. (HRMY) and Illumina (ILMN). But which of these two stocks presents investors with the better value opportunity right now? 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, Harmony Biosciences Holdings, Inc. has a Zacks Rank of #1 (Strong Buy), while Illumina has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HRMY is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
HRMY currently has a forward P/E ratio of 9.03, while ILMN has a forward P/E of 139.91. We also note that HRMY has a PEG ratio of 0.48. 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 26.10.
Another notable valuation metric for HRMY is its P/B ratio of 3.84. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ILMN has a P/B of 3.89.
Based on these metrics and many more, HRMY holds a Value grade of A, while ILMN has a Value grade of D.
HRMY stands above ILMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HRMY is the superior value option right now.
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