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CELG vs. VRTX: Which Stock Is the Better Value Option?

Zacks

Investors looking for stocks in the Medical – Biomedical and Genetics sector might want to consider either Celgene (CELG) or Vertex Pharmaceuticals (VRTX). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Celgene has a Zacks Rank of #1 (Strong Buy), while Vertex Pharmaceuticals has a Zacks Rank of #5 (Strong Sell) right now. Investors should feel comfortable knowing that CELG likely has seen a stronger improvement to its earnings outlook than VRTX has recently. 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.


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.

CELG currently has a forward P/E ratio of 7.98, while VRTX has a forward P/E of 45.07. We also note that CELG has a PEG ratio of 0.36. 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. VRTX currently has a PEG ratio of 1.73.

Another notable valuation metric for CELG is its P/B ratio of 9.74. 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, VRTX has a P/B of 10.52.

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

CELG 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 CELG is likely the superior value option right now.


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