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 Friday, April 05, 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.

Cardinal Health Inc’s Value Grade

Value Grade:

Cardinal Health, Inc. is a global healthcare services and products company. The Company is engaged in providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and patients in the home. The Company also provides pharmaceuticals and medical products and laboratory product solutions. The Company connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination and better patient management. The Company's segments include Pharmaceutical and Medical. Its Pharmaceutical segment distributes branded and generic pharmaceuticals, specialty pharmaceuticals and over-the-counter healthcare and consumer products in the United States. Its Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets.

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.

Cardinal Health Inc has a Value Score of 77, which is considered to be undervalued.

When you look at Cardinal Health Inc’s price-to-sales ratio at 0.12 compared to the industry median at 2.72, this company has a lower price relative to revenue compared to its peers. This could make Cardinal Health Inc’s stock more attractive for value investors.

Cardinal Health Inc’s price-earnings ratio is 43.33 compared to the industry median at 24.52. This means it has a higher share price relative to earnings compared to its peers. This could make Cardinal Health Inc less attractive for value investors.

Now, let’s assess Cardinal Health Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 9.1, when compared to the industry median of 10.8, 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. Cardinal Health Inc’s shareholder yield is higher than its industry median ratio of (3.22%). 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 Cardinal Health Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Cardinal Health Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 18.49. This could make Cardinal Health Inc more attractive because the lower P/FCF ratio indicates that Cardinal Health 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.

Clever Leaves Holdings Inc’s Value Grade

Value Grade:

Clever Leaves Holdings Inc. is a multinational operator and licensed producer of pharmaceutical-grade cannabinoids. The Company's segments include Cannabinoid and Non-Cannabinoid. The Cannabinoid segment is comprised of cultivation, extraction, manufacturing, commercialization, and distribution of cannabinoid products. The Non-Cannabinoid operating segment is comprised of the brands and manufacturing assets acquired as part of its acquisition of Herbal Brands. The Non-Cannabinoid segment is engaged in the business of formulating, manufacturing, marketing, selling, distributing, and otherwise commercializing wellness products and nutraceuticals, excluding cannabinoid products. Its customers for the Herbal Brands products include specialty and health retailers, mass retailers and specialty and health stores in the United States. It offers product portfolio in two categories: nutraceuticals and cannabinoids. The nutraceutical products consist of a variety of beverage and powder 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.

Clever Leaves Holdings Inc has a Value Score of 75, which is considered to be undervalued.

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

You can read more about Clever Leaves Holdings 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.

Fortress Biotech Inc’s Value Grade

Value Grade:

Fortress Biotech, Inc. is a biopharmaceutical company focused on acquiring and advancing assets. The Company has seven marketed prescription pharmaceutical products and over 25 programs in development at the Company, at its majority-owned and majority-controlled partners and subsidiaries and at partners and subsidiaries it founded and in which it holds significant minority ownership positions. Such product candidates span six market areas, including oncology, rare diseases and gene therapy. Its dermatology products include Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, Exelderm and Luxamend. Its late stage product candidates include Cosibelimab (anti-PD-L1 antibody), DFD-29 (modified release oral minocycline for the treatment of rosacea), CUTX-101 (copper histidinate injection for Menkes disease), IV Tramadol, Olafertinib (also known as CK-101, EGFR inhibitor for EGFR mutation-positive NSCLC), CAEL-101 (monoclonal antibody for AL amyloidosis) and Triplex (cytomegalovirus (CMV) vaccine).

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.

Fortress Biotech Inc has a Value Score of 61, which is considered to be undervalued.

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

You can read more about Fortress Biotech 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.

Hoth Therapeutics Inc’s Value Grade

Value Grade:

Hoth Therapeutics, Inc. is a clinical-stage biopharmaceutical company. The Company is focused on developing a topical formulation for treating side effects from drugs used for the treatment of cancer (HT-001); a treatment for mast-cell derived cancers and anaphylaxis (HT-KIT); a treatment for traumatic brain injury and ischemic stroke (HT-TBI) and a treatment and/or prevention for Alzheimer’s or other neuroinflammatory diseases (HT-ALZ). It also has assets being developed for atopic dermatitis (also known as eczema) (BioLexa); a treatment for asthma and allergies using inhalational administration (HT-004), and a treatment for acne as well as inflammatory bowel diseases (HT-003). Its development products include HT-001, HT-KIT, HT-ALZ, and HT-TBI. Its BioLexa Platform is a proprietary, patented, drug compound platform for the treatment of eczema. The Company also has interests in certain other assets being developed by third parties including a treatment for patients with lupus.

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.

Hoth Therapeutics Inc has a Value Score of 67, which is considered to be undervalued.

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

You can read more about Hoth Therapeutics 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.

Organon & Co’s Value Grade

Value Grade:

Organon & Co. is a global health care company. The Company is engaged in developing and delivering health solutions through a portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands. It has a portfolio of contraception and fertility brands, including Nexplanon, NuvaRing, and Follistim AQ. The Company’s Biosimilars portfolio spans across immunology and oncology treatments. It also has a portfolio of established brands, including brands in cardiovascular, respiratory, dermatology and non-opioid pain management. It sells these products through various channels, including drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. The Company operates six manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom.

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.

Organon & Co has a Value Score of 89, which is considered to be undervalued.

Organon & Co’s price-earnings ratio is 4.5 compared to the industry median at 24.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Organon & Co more attractive for value investors.

You can read more about Organon & Co’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.

Scorpius Holdings Inc’s Value Grade

Value Grade:

Scorpius Holdings, Inc., formerly NightHawk Biosciences, Inc., is an integrated contract development and manufacturing company. The Company is focused on advancing biologic and cell therapy programs to the clinic and beyond. It offers a broad array of analytical testing, process development, and manufacturing services to pharmaceutical and biotech companies at its facilities in San Antonio, Texas. Its analytical services include development of a comprehensive range of analytical test methods to characterize complex biologics, including cell therapy-based products, protein therapeutics, vaccines and advanced therapies. Its Clinical Biomanufacturing includes cGMP Mammalian Cell Culture, and cGMP Microbial Fermentation. Its San Antonio facility is focused on the commercial-scale manufacturing of biodefense-focused molecules and biologics therapeutics. Its biomanufacturing services focus on accelerating product development timelines from pre-clinical evaluation to first-in-human studies.

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.

Scorpius Holdings Inc has a Value Score of 65, which is considered to be undervalued.

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

You can read more about Scorpius Holdings 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.

• Cardinal Health Inc stock has a Value Grade of B.
• Clever Leaves Holdings Inc stock has a Value Grade of B.
• Fortress Biotech Inc stock has a Value Grade of B.
• Hoth Therapeutics Inc stock has a Value Grade of B.
• Organon & Co stock has a Value Grade of A.
• Scorpius Holdings 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 Friday, April 05
• Which Is a Better Investment, Hims & Hers Health Inc or Tilray Brands Inc Stock?
• 3 Undervalued Pharmaceuticals Stocks for Thursday, April 04
• Why AbbVie Inc’s (ABBV) Stock Is Down 5.32%

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