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PFE vs. NVO: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Large Cap Pharmaceuticals sector have probably already heard of Pfizer (PFE - Free Report) and Novo Nordisk (NVO - Free Report) . 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.

Both Pfizer and Novo Nordisk have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 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.

PFE currently has a forward P/E ratio of 10.66, while NVO has a forward P/E of 30.44. We also note that PFE has a PEG ratio of 1.59. 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. NVO currently has a PEG ratio of 2.77.

Another notable valuation metric for PFE is its P/B ratio of 3.47. 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, NVO has a P/B of 21.95.

These are just a few of the metrics contributing to PFE's Value grade of B and NVO's Value grade of C.

Both PFE and NVO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PFE is the superior value option right now.


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