Back to top

Image: Bigstock

BMY vs. VRTX: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors with an interest in Medical - Biomedical and Genetics stocks have likely encountered both Bristol Myers Squibb (BMY - Free Report) and Vertex Pharmaceuticals (VRTX - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

Bristol Myers Squibb has a Zacks Rank of #2 (Buy), while Vertex Pharmaceuticals has a Zacks Rank of #3 (Hold) right now. This means that BMY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

BMY currently has a forward P/E ratio of 89.98, while VRTX has a forward P/E of 259.45. We also note that BMY has a PEG ratio of 18. 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. VRTX currently has a PEG ratio of 20.29.

Another notable valuation metric for BMY is its P/B ratio of 6. 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, VRTX has a P/B of 6.94.

Based on these metrics and many more, BMY holds a Value grade of B, while VRTX has a Value grade of D.

BMY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BMY is likely the superior value option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Bristol Myers Squibb Company (BMY) - free report >>

Vertex Pharmaceuticals Incorporated (VRTX) - free report >>

Published in