Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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.

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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4 Undervalued Pharmaceuticals Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Pharmaceuticals industry for Thursday, February 15, 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.

China Pharma Holdings Inc’s Value Grade

Value Grade:

China Pharma Holdings Inc is a company principally engaged in the development, manufacture and marketing of pharmaceutical products. The Company's products are for human use in connection, and with a variety of high-incidence and high-mortality diseases and medical conditions prevalent. The Company manufactures pharmaceutical products in the form of dry powder injectables, liquid injectables, tablets, capsules, and cephalosporin oral solutions. In addition, the Company is also engaged in the production of comprehensive healthcare products and protective 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.

China Pharma Holdings Inc has a Value Score of 74, which is considered to be undervalued.

When you look at China Pharma Holdings Inc’s price-to-sales ratio at 0.16 compared to the industry median at 2.47, this company has a lower price relative to revenue compared to its peers. This could make China Pharma Holdings Inc’s stock more attractive for value investors.

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. China Pharma Holdings Inc’s shareholder yield is lower than its industry median ratio of (3.83%). 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.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. China Pharma Holdings Inc’s price-to-book ratio is lower than its industry median ratio of 1.80. This could make China Pharma Holdings Inc more attractive to investors looking for a new addition to their portfolio.

Cronos Group Inc’s Value Grade

Value Grade:

Cronos Group Inc. is a Canada-based global cannabinoid company engaged in building intellectual property by advancing cannabis research, technology and product development. The Company’s segments include United States and Rest of World. The United States operating segment consists of the manufacture and distribution of hemp-derived CBD infused products. The Rest of World operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. The Company’s international brand portfolio includes Spinach, PEACE NATURALS, Lord Jones, Happy Dance and PEACE+. The Lord Jones, Happy Dance and PEACE+ are hemp-derived cannabidiol (CBD) brands. The Company’s subsidiaries include Cronos Israel G.S. Cultivation Ltd., Cronos Israel G.S. Manufacturing Ltd., Cronos Israel G.S. Store Ltd., and Cronos Israel G.S. Pharmacy Ltd.

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.

Cronos Group Inc has a Value Score of 67, which is considered to be undervalued.

Cronos Group Inc’s price-to-book ratio is higher than its peers. This could make Cronos Group Inc less attractive for value investors when compared to the industry median at 1.80.

You can read more about Cronos Group 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.

Grifols SA - ADR’s Value Grade

Value Grade:

Grifols SA is a Spain-based global specialty pharmaceutical company developing, manufacturing and distributing a broad range of biological medicines based on plasma derived proteins. It organizes its business into five divisions: Bioscience, Diagnostic, Hospital, Bio Supplies and Others. Bioscience includes manufacturing activities of plasma derivatives for therapeutic use and the sale and distribution of end products. Diagnostic focuses on researching, developing, manufacturing and marketing in vitro diagnostics products, such as analytical instruments, reagents and software, among others, for laboratories. Hospital offers technology and services for hospitals, clinics and specialized centers for the manufacture of medicines, as well as physiological saline solution, enteral nutritional fluids and medical devices for interventional therapy. Bio Supplies provides, mostly, biological products for non-therapeutic use. Others provides manufacturing services to third party companies.

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.

Grifols SA - ADR has a Value Score of 65, which is considered to be undervalued.

Grifols SA - ADR’s price-earnings ratio is 26.4 compared to the industry median at 26.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Grifols SA - ADR fairly attractive for value investors.

Grifols SA - ADR’s price-to-book ratio is higher than its peers. This could make Grifols SA - ADR less attractive for value investors when compared to the industry median at 1.80.

You can read more about Grifols SA - ADR’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.

RedHill Biopharma Ltd (ADR)’s Value Grade

Value Grade:

RedHill Biopharma Ltd is an Israel-based specialty biopharmaceutical company primarily focused on gastrointestinal and infectious diseases. RedHill promotes the gastrointestinal drugs such as, Talicia for the treatment of Helicobacter pylori (H. pylori) infection, and Aemcolo, for the treatment of travelers? diarrhea. RedHill?s clinical late-stage development programs include: :info: RHB-204, for pulmonary nontuberculous mycobacteria (NTM) disease; opaganib (ABC294640), host-directed, SPHK2 inhibitor targeting multiple indications, RHB-107 (upamostat), an oral, host-directed serine protease inhibitor with potential for pandemic preparedness, is in late-stage development for treatment of non-hospitalized symptomatic COVID-19, and is targeting multiple other cancer and inflammatory gastrointestinal diseases; RHB-104 for Crohn's disease; and RHB-102 for chemotherapy and radiotherapy induced nausea and vomiting.

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.

RedHill Biopharma Ltd (ADR) has a Value Score of 69, which is considered to be undervalued.

RedHill Biopharma Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make RedHill Biopharma Ltd (ADR) less attractive for value investors when compared to the industry median at 1.80.

You can read more about RedHill Biopharma Ltd (ADR)’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 4 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.

• China Pharma Holdings Inc stock has a Value Grade of B.
• Cronos Group Inc stock has a Value Grade of B.
• Grifols SA - ADR stock has a Value Grade of B.
• RedHill Biopharma Ltd (ADR) stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Pharmaceuticals Stocks for Thursday, February 15
• 7 Undervalued Pharmaceuticals Stocks for Wednesday, February 14
• Why Corcept Therapeutics Incorporated’s (CORT) Stock Is Up 4.99%
• Why Hims & Hers Health Inc’s (HIMS) Stock Is Up 5.38%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.