Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 Undervalued Pharmaceuticals Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Pharmaceuticals industry for Tuesday, March 12, 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.

Bayer AG (ADR)’s Value Grade

Value Grade:

Bayer AG is a German-based life science company. The Company's segments are Pharmaceuticala and Consumer Health. The Pharmaceuticals segment focuses on researching, developing and marketing prescription products and specialty therapeutics especially in the areas of cardiology, oncology, gynecology, hematology and ophthalmology, as well as radiopharmacology and others. The Company is focusing on their oncology platform for Targeted Alpha Therapies for treating prostate cancer. The Consumer Health segment develops, produces and markets nonprescription over-the-counter products in the dermatology, dietary supplement, analgesic, gastrointestinal, cold, allergy, sinus and flu, foot care and sun protection categories, among others. The Crop Science segment has been moved to Cinven which operates as an independent company called Envu.

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.

Bayer AG (ADR) has a Value Score of 96, which is considered to be undervalued.

When you look at Bayer AG (ADR)’s price-to-sales ratio at 0.55 compared to the industry median at 2.61, this company has a lower price relative to revenue compared to its peers. This could make Bayer AG (ADR)’s stock more attractive for value investors.

Now, let’s assess Bayer AG (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 4.0, when compared to the industry median of 10.5, 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. Bayer AG (ADR)’s shareholder yield is higher than its industry median ratio of (3.27%). 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. Bayer AG (ADR)’s price-to-book ratio is lower than its industry median ratio of 1.96. This could make Bayer AG (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bayer AG (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bayer AG (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 18.54. This could make Bayer AG (ADR) more attractive because the lower P/FCF ratio indicates that Bayer AG (ADR) 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.

Cumberland Pharmaceuticals, Inc.’s Value Grade

Value Grade:

Cumberland Pharmaceuticals Inc. is a specialty pharmaceutical company. The Company is focused on the acquisition, development and commercialization of branded prescription pharmaceutical products. Its portfolio of brands includes Acetadote injection, for the treatment of acetaminophen poisoning; Caldolor injection, for the treatment of pain and fever, Kristalose for oral solution, a prescription laxative, for the treatment of constipation, and Omeclamox-Pak, oral, for the treatment of Helicobacter pylori infection and related duodenal ulcer disease. Its brands also include RediTrex injection, for the treatment of active rheumatoid, juvenile idiopathic and severe psoriatic arthritis, as well as disabling psoriasis; Sancuso transdermal, for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatment; Vaprisol injection, to raise serum sodium levels in hospitalized patients with euvolemic and hypervolemic hyponatremia, and Vibativ injection.

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.

Cumberland Pharmaceuticals, Inc. has a Value Score of 93, which is considered to be undervalued.

Cumberland Pharmaceuticals, Inc.’s price-to-book ratio is higher than its peers. This could make Cumberland Pharmaceuticals, Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Cumberland 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.

Integrated BioPharma, Inc.’s Value Grade

Value Grade:

Integrated Biopharma Inc. is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements, and herbal products. The Company’s business segments include Contract Manufacturing operated by Manhattan Drug Company, Inc. (MDC), which manufactures vitamins and nutritional supplements for sale to distributors, multilevel marketers and specialized health-care providers; and Other Nutraceutical Businesses, which includes the operations of AgroLabs, Inc. (AgroLabs), The Vitamin Factory (the Vitamin Factory), IHT Health Products, Inc. (IHT), MDC Warehousing and Distribution, Inc., and Chem International, Inc. AgroLabs distributes healthful nutritional products for sale through mass market, grocery and drug and vitamin retailers under the brands: Peaceful Sleep, and Wheatgrass and other products. IHT is a distributor of fine natural botanicals, including multi-minerals produced under a license agreement. Chem is a distributor of raw materials.

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.

Integrated BioPharma, Inc. has a Value Score of 94, which is considered to be undervalued.

Integrated BioPharma, Inc.’s price-to-book ratio is higher than its peers. This could make Integrated BioPharma, Inc. less attractive for value investors when compared to the industry median at 1.96.

You can read more about Integrated BioPharma, 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.

Intellipharmaceutics International Inc’s Value Grade

Value Grade:

Intellipharmaceutics International Inc. is a pharmaceutical company specializing in the research, development and manufacture of novel and generic controlled-release and targeted-release oral solid dosage drugs. Its Hypermatrix technology is a multidimensional controlled-release drug delivery platform that can be applied to a range of existing and new pharmaceuticals. It has developed several drug delivery systems based on this technology platform, with a pipeline of products in various stages of development in therapeutic areas that include neurology, cardiovascular, gastrointestinal tract (GIT), diabetes and pain. Its product portfolio includes Oxycodone Hydrochloride ER, Regabatin, Dexmethylphenidate ER, Metformin ER, Venlafaxine ER, Pantoprazole ER, Quetiapine ER, Lamotrigine ER, Levetiracetam ER, Desvenlafaxine ER, Ranolazine ER, and Carvedilol ER. Its product portfolio includes both new products and controlled-release generic products. It also provides analytical services.

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.

Intellipharmaceutics International Inc has a Value Score of 82, which is considered to be undervalued.

You can read more about Intellipharmaceutics International 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.

Medicine Man Technologies Inc’s Value Grade

Value Grade:

Medicine Man Technologies, Inc., operating as Schwazze, is a vertically integrated multi-state cannabis operator. The Company?s business involves the cultivation, manufacturing, distribution and retail sale of cannabis and cannabis-related products. The Company sells products it manufactures and cultivates and a variety of other cannabis goods through wholly owned retail stores, licensing arrangements, and/or third-party operators and retailers. The Company has three segments: Retail, Wholesale and Other. Retail segment consists of retail locations for the sale of cannabis products. The segment includes its Retail dispensaries located in Colorado and New Mexico. Wholesale segment consists of manufacturing, cultivation and sale of both wholesale cannabis and non-cannabis products. Other segment includes general corporate and other. It has operations in Colorado and New Mexico. It owns and operates 42 retail dispensaries, five cultivation facilities, and two manufacturing facilities.

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.

Medicine Man Technologies Inc has a Value Score of 82, which is considered to be undervalued.

Medicine Man Technologies Inc’s price-to-book ratio is higher than its peers. This could make Medicine Man Technologies Inc less attractive for value investors when compared to the industry median at 1.96.

You can read more about Medicine Man Technologies 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.

Sonoma Pharmaceuticals Inc’s Value Grade

Value Grade:

Sonoma Pharmaceuticals, Inc. is engaged in developing and producing stabilized hypochlorous acid (HOCl), products for a range of applications, including wound care, animal health care, eye care, oral care and dermatological conditions. The Company's product offerings include Regenacyn Advanced Scar Gel, Regenacyn Plus Scar Gel, Rejuvacyn Advanced Skin Repair Cooling Mist, Pediacyn Skin Care, Microcyn, Ocucyn Eyelid and Eyelash Cleanser, Microdacyn60 Oral Care, Podiacyn Advanced Everyday Foot Care, and MicrocynAH. Regenacyn Advanced Scar Gel helps to improve the overall appearance of scars while reducing pain, itch, redness, and inflammation. Regenacyn Plus is a prescription-strength scar gel which is available as an office dispense product through dermatology practices and medical spas. Pediacyn is a pediatric dermatology and wound care product for over-the-counter use. MicrocynAH is a HOCl-based topical product that cleans, debrides and treats a range of animal wounds and infections.

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.

Sonoma Pharmaceuticals Inc has a Value Score of 72, which is considered to be undervalued.

Sonoma Pharmaceuticals Inc’s price-to-book ratio is higher than its peers. This could make Sonoma Pharmaceuticals Inc less attractive for value investors when compared to the industry median at 1.96.

You can read more about Sonoma 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.

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 6 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.

• Bayer AG (ADR) stock has a Value Grade of A.
• Cumberland Pharmaceuticals, Inc. stock has a Value Grade of A.
• Integrated BioPharma, Inc. stock has a Value Grade of A.
• Intellipharmaceutics International Inc stock has a Value Grade of A.
• Medicine Man Technologies Inc stock has a Value Grade of A.
• Sonoma Pharmaceuticals Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Pharmaceuticals Stocks for Tuesday, March 12
• Which Is a Better Investment, Apellis Pharmaceuticals Inc or Avidity Biosciences Inc Stock?
• Which Is a Better Investment, Avidity Biosciences Inc or Twist Bioscience Corp Stock?
• Which Is a Better Investment, Avidity Biosciences Inc or Vericel Corp Stock?

AAII Disclaimer

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