Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 stocks made the list for top value stocks in the Pharmaceuticals industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Pharmaceuticals Stock News

Before choosing which top Pharmaceuticals stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The outlook for the Pharmaceuticals sub-industry is positive as the world returns to normalcy and demand for electives and improved medical utilization. COVID-19 therapies, oncology and immunology are essential aspects of pharmaceutical companies. Should COVID-19 variants continue to arise getting a COVID-19 vaccine could become a seasonal phenomenon, much like the flu vaccine. If that were to happen, it would prove to be very lucrative for pharmaceutical companies, as it would generate recurring sales. Recent FDA recommendations, such as approval for a fourth booster dose for those aged 50 or older, suggests we may be moving in this direction. Generic drug makers are expected to continue to struggle due to lower-cost emerging market competition. Despite this, policy risks are on the rise. Lowering drug prices continues to be a bipartisan issue as both parties aim to offer Americans more affordable prices. While this provides uncertainty in the long-term, it is unlikely that legislation will get passed in the near future due to more pressing issues in the political agenda. Year to date through June 3, the S&P Pharmaceuticals Index was up 1.5% vs. a 13.6% decline for the S&P Composite 1500 Index. In 2021, the S&P Pharmaceuticals Index returned a gain of 21.8%, vs. a gain of 26.7% for the S&P Composite 1500.

Why Focus on Undervalued Pharmaceuticals Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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5 Undervalued Pharmaceuticals Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Pharmaceuticals industry for Wednesday, January 17, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Pharmaceuticals industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Bausch Health Companies Inc’s Value Grade

Value Grade:

Bausch Health Companies Inc. is a global diversified pharmaceutical company. The Company develops, manufactures, and markets a range of products primarily in gastroenterology (GI), hepatology, neurology, dermatology, eye health, and others, through Bausch + Lomb Corporation. Its Salix segment consists of sales in the United States of GI products. Its International segment consists of sales, with the exception of sales of Bausch + Lomb products and Solta Medical aesthetic medical devices, outside the United States and Puerto Rico of branded pharmaceutical products, branded generic pharmaceutical products and other products. Its Solta Medical segment consists of global sales of Solta Medical aesthetic medical devices. Its Diversified segment consists of sales in the United States of pharmaceutical products in the areas of neurology and certain other therapeutic classes. Its Bausch + Lomb segment consists of global sales of Bausch + Lomb Vision Care, surgical and pharmaceutical products.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Bausch Health Companies Inc has a Value Score of 81, which is considered to be undervalued.

When you look at Bausch Health Companies Inc’s price-to-sales ratio at 0.36 compared to the industry median at 2.30, this company has a lower price relative to revenue compared to its peers. This could make Bausch Health Companies Inc’s stock more attractive for value investors.

Now, let’s assess Bausch Health Companies Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 9.1, when compared to the industry median of 9.7, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Bausch Health Companies Inc’s shareholder yield is higher than its industry median ratio of (3.41%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

Lastly, let’s take a look at Bausch Health Companies Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bausch Health Companies Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 16.04. This could make Bausch Health Companies Inc more attractive because the lower P/FCF ratio indicates that Bausch Health Companies Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Cocrystal Pharma Inc’s Value Grade

Value Grade:

Cocrystal Pharma, Inc. is a biotechnology company. The Company is engaged in discovering and developing novel antiviral therapeutics that target the replication process of influenza viruses, coronaviruses (including SARS-CoV-2), hepatitis C viruses and noroviruses. It is developing antiviral therapeutics that inhibit the essential viral replication function of RNA viruses, causing acute and chronic viral diseases. It also uses advanced computational methods to screen and design product candidates using proprietary cocrystal structural information. The Company?s pipeline CC-42344 is an oral PB2 inhibitor discovered using Cocrystals proprietary structure-based drug discovery platform technology. It is specifically designed to be effective against all pandemic and seasonal influenza A strains and to have a high barrier to resistance due to the way the virus replication machinery is targeted.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Cocrystal Pharma Inc has a Value Score of 76, which is considered to be undervalued.

Cocrystal Pharma Inc’s price-to-book ratio is higher than its peers. This could make Cocrystal Pharma Inc less attractive for value investors when compared to the industry median at 1.78.

You can read more about Cocrystal Pharma Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Kiora Pharmaceuticals Inc’s Value Grade

Value Grade:

Kiora Pharmaceuticals, Inc. is a clinical-stage pharmaceutical company. The Company is focused on developing and commercializing therapies for the treatment of ophthalmic diseases. Its pipeline consists of three product candidates, including KIO-101, KIO-301, and KIO-201. Its lead product, KIO-301, is a vision-restoring small molecule that is designed to restore vision in patients with inherited and age-related degenerative retinal diseases, including retinitis pigmentosa (RP). KIO-101 focuses on treating the ocular manifestation of patients with autoimmune diseases, including rheumatoid arthritis, and as such is termed the Ocular Presentation of Rheumatoid Arthritis and Other Autoimmune Diseases (OPRA+). KIO-101 is a next-generation, non-steroidal, immuno-modulatory, small-molecule inhibitor of dihydroorotate dehydrogenase. KIO-201 is a synthetic modified hyaluronic acid (HA) capable of coating the ocular surface and designed to resist degradation under conditions present in the eye.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Kiora Pharmaceuticals Inc has a Value Score of 71, which is considered to be undervalued.

Kiora Pharmaceuticals Inc’s price-to-book ratio is higher than its peers. This could make Kiora Pharmaceuticals Inc less attractive for value investors when compared to the industry median at 1.78.

You can read more about Kiora Pharmaceuticals Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

McKesson Corp’s Value Grade

Value Grade:

McKesson Corporation is a provider of diversified healthcare services. The Company is engaged in advancing health outcomes for patients everywhere. Its U.S. Pharmaceutical segment distributes branded, generic, specialty, biosimilar, and over the counter (OTC) pharmaceutical drugs and other healthcare-related products in the United States. Its Prescription Technology Solutions segment helps solve medication access, affordability, and adherence challenges for patients by working across healthcare to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies. Its Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers, including physician offices, surgery centers, nursing homes, hospital reference labs, and home healthcare agencies. Its International segment provides distribution and services to wholesale, institutional, and retail customers in Europe and Canada.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

McKesson Corp has a Value Score of 71, which is considered to be undervalued.

McKesson Corp’s price-earnings ratio is 19.3 compared to the industry median at 26.1. This means that it has a lower price relative to its earnings compared to its peers. This makes McKesson Corp more attractive for value investors.

You can read more about McKesson Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Procyon Corp’s Value Grade

Value Grade:

Procyon Corporation operates through its subsidiaries AMERX Health Care Corporation (AMERX) and Sirius Medical Supply, Inc. (Sirius). AMERX develops and markets proprietary medical products used in the treatment of pressure ulcers, stasis ulcers, wounds, dermatitis, inflammation and other skin problems. Its product lines include AMERX, AMERIGEL, HELIX3 Bioactive Collagen, EXTREMIT-EASE Compression Garment and Advantagen Surgical Collagen. AMERX markets a line of AMERIGEL advanced skin and wound care products made with Oakin, that promote healing in wound and problematic skin conditions, including AMERIGEL Hydrogel Wound Dressing, AMERIGEL Post Op Surgical Kits, AMERIGEL Saline Wound Wash, AMERIGEL Care Lotion, and AMERIGEL Barrier Lotion. HELIX3 is available in Collagen Powder and Collagen Matrix. Its wound care product includes AMERX Calcium Alginate Dressing, AMERX Foam Dressing, AMERX Gauze Dressing, AMERX Hyrdocolloid Dressing, and AMERX Wound Care Kits.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Procyon Corp has a Value Score of 74, which is considered to be undervalued.

Procyon Corp’s price-to-book ratio is higher than its peers. This could make Procyon Corp less attractive for value investors when compared to the industry median at 1.78.

You can read more about Procyon Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Pharmaceuticals Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Pharmaceuticals stocks as well as other industrys.

Choosing Which of the 5 Best Pharmaceuticals Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Bausch Health Companies Inc stock has a Value Grade of A.
• Cocrystal Pharma Inc stock has a Value Grade of B.
• Kiora Pharmaceuticals Inc stock has a Value Grade of B.
• McKesson Corp stock has a Value Grade of B.
• Procyon Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 5 undervalued stocks in the Pharmaceuticals industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Pharmaceuticals Stocks

Want to learn more about Pharmaceuticals stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 5 Undervalued Pharmaceuticals Stocks for Wednesday, January 17
• What You Need to Know About AbbVie Inc's Q3 Earnings
• What You Need to Know About Amgen Inc's Q3 Earnings
• What You Need to Know About Amneal Pharmaceuticals Inc's Q3 Earnings

AAII Disclaimer

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