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, May 24, 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.

Aadi Bioscience Inc’s Value Grade

Value Grade:

Aadi Bioscience, Inc. is a commercial-stage biopharmaceutical company. The Company is focused on developing and commercializing precision therapies for cancers with alterations in the mammalian target of rapamycin (mTOR) pathway, a regulator of cell growth and cancer progression. Its lead drug product, FYARRO, is an mTOR inhibitor indicated for the treatment of adult patients with locally advanced unresectable or metastatic malignant perivascular epithelioid cell tumor (PEComa). FYARRO is a form of sirolimus bound to albumin. Sirolimus is a potent inhibitor of the mTOR biological pathway and inhibits downstream signaling from mTOR, which can promote tumor growth. FYARRO is composed of nanoparticles of sirolimus bound to human albumin with an average size less than 100 nanometers. It has also initiated a tumor-agnostic Phase II study (PRECISION 1) of FYARRO in patients with Tuberous Sclerosis Complex 1 and 2 (TSC1 and TSC2) alterations.

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.

Aadi Bioscience Inc has a Value Score of 64, which is considered to be undervalued.

When you look at Aadi Bioscience Inc’s price-to-sales ratio at 2.06 compared to the industry median at 2.37, this company has a lower price relative to revenue compared to its peers. This could make Aadi Bioscience 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. Aadi Bioscience Inc’s shareholder yield is higher than its industry median ratio of (3.13%). 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. Aadi Bioscience Inc’s price-to-book ratio is lower than its industry median ratio of 2.41. This could make Aadi Bioscience Inc more attractive to investors looking for a new addition to their portfolio.

Bristol-Myers Squibb Co’s Value Grade

Value Grade:

Bristol-Myers Squibb Company is a biopharmaceutical company engaged in the discovery, development and delivering advanced medicines that help patients prevail over serious diseases. It offers products for various therapeutic classes, which includes oncology, hematology, immunology, cardiovascular and neuroscience. Its pharmaceutical products include chemically synthesized or small molecule drugs, products produced from biological processes, called biologics and chimeric antigen receptor (CAR-T) cell therapies. Small molecule drugs are typically administered orally in the form of a tablet or capsule, although other drug delivery mechanisms are used as well. Biologics are administered to patients through injections or by intravenous infusion. Its in-line products include Eliquis, Opdivo, Orencia, Pomalyst/Imnovid, Yervoy, Sprycel, Reblozyl, Opdualag, Abecma, Zeposia, and others. The Company's product pipeline includes Krazati, MRTX1719, RYZ101, KarXT, ORM-6151, and Repotrectinib.

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.

Bristol-Myers Squibb Co has a Value Score of 62, which is considered to be undervalued.

Bristol-Myers Squibb Co’s price-to-book ratio is lower than its peers. This could make Bristol-Myers Squibb Co more attractive for value investors when compared to the industry median at 2.41.

You can read more about Bristol-Myers Squibb 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.

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. The Company’s segments include Pharmaceutical and Specialty Solutions (PSS) and Global Medical Products and Distribution (GMPD). The PSS segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products in the United States. The GMPD 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. It connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination. It also offers Olathe medical devices.

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 68, which is considered to be undervalued.

Cardinal Health Inc’s price-earnings ratio is 42.6 compared to the industry median at 23.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Cardinal Health Inc less attractive for value investors.

You can read more about Cardinal Health 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.

Collegium Pharmaceutical Inc’s Value Grade

Value Grade:

Collegium Pharmaceutical, Inc. is a diversified specialty pharmaceutical company. The Company commercializes its pain portfolio, consisting of Xtampza extended-release (ER), Nucynta ER and Nucynta immediate-release (IR), Belbuca, and Symproic in the United States. Xtampza ER is an abuse-deterrent, extended-release, oral formulation of oxycodone. Xtampza ER is a pain treatment option designed with abuse deterrent properties and uses a technology platform, DETERx. The Nucynta Products are ER and IR oral formulations of tapentadol. Nucynta ER is indicated for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic. Nucynta IR is indicated for the management of acute pain severe enough to require an opioid analgesic. Belbuca is a buccal film that contains buprenorphine for severe and persistent pain. Symproic is used for the treatment of opioid-induced constipation (OIC) in adult patients with chronic non-cancer pain.

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.

Collegium Pharmaceutical Inc has a Value Score of 70, which is considered to be undervalued.

Collegium Pharmaceutical Inc’s price-earnings ratio is 16.4 compared to the industry median at 23.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Collegium Pharmaceutical Inc more attractive for value investors.

Collegium Pharmaceutical Inc’s price-to-book ratio is lower than its peers. This could make Collegium Pharmaceutical Inc more attractive for value investors when compared to the industry median at 2.41.

You can read more about Collegium Pharmaceutical 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.

Perrigo Company PLC’s Value Grade

Value Grade:

Perrigo Company plc is an Ireland-based provider of over the counter (OTC) health and wellness solutions that are designed to enhance individual well-being. The Company's segments include Consumer Self-Care Americas (CSCA) and Consumer Self-Care International (CSCI). The CSCA segment comprises its consumer self-care business (OTC, infant formula, and oral care categories, and contract manufacturing) in the United States and Canada, including the HRA Pharma self-care business (Women's Health and Skin-Care categories) in the United States and Canada. The CSCI segment comprises its consumer self-care business in Europe and Australia, which are primarily branded, its store brand business in the United Kingdom and parts of Europe and Asia and includes the HRA Pharma self-care business (Women's Health, Skin-Care and Rare-Disease categories) in Europe. Its product categories include Upper Respiratory, Pain and Sleep-Aids, Skincare and Personal Hygiene, Digestive Health, Nutrition and others.

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.

Perrigo Company PLC has a Value Score of 62, which is considered to be undervalued.

Perrigo Company PLC’s price-to-book ratio is higher than its peers. This could make Perrigo Company PLC less attractive for value investors when compared to the industry median at 2.41.

You can read more about Perrigo Company PLC’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.

Rapid Micro Biosystems Inc’s Value Grade

Value Grade:

Rapid Micro Biosystems, Inc. is a life sciences technology company providing mission critical automation solutions to facilitate the manufacturing and release of healthcare products, such as biologics, vaccines, cell and gene therapies, and sterile injectables. The Company's flagship Growth Direct system automates and modernizes the antiquated, manual microbial quality control, testing workflows used in pharmaceutical manufacturing operations. It offers four specific applications for testing of microbial contamination: Environmental Monitoring, which tests the manufacturing environment, including circulating air, exposed surfaces, and personnel; Water, which tests any purified water used at any stage of the drug production process, including water for injection; In-Process Bioburden, which tests raw materials, drug substance and in-process product, and Sterility Release offering final testing of finished product to ensure sterility before the product is released for commercial sale.

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.

Rapid Micro Biosystems Inc has a Value Score of 70, which is considered to be undervalued.

Rapid Micro Biosystems Inc’s price-to-book ratio is higher than its peers. This could make Rapid Micro Biosystems Inc less attractive for value investors when compared to the industry median at 2.41.

You can read more about Rapid Micro Biosystems 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.

• Aadi Bioscience Inc stock has a Value Grade of B.
• Bristol-Myers Squibb Co stock has a Value Grade of B.
• Cardinal Health Inc stock has a Value Grade of B.
• Collegium Pharmaceutical Inc stock has a Value Grade of B.
• Perrigo Company PLC stock has a Value Grade of B.
• Rapid Micro Biosystems 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, May 24
• 7 Undervalued Pharmaceuticals Stocks for Thursday, May 23
• What You Need to Know About Calliditas Therapeutics AB - ADR's Q1 Earnings
• Why Apellis Pharmaceuticals Inc’s (APLS) Stock Is Down 8.99%

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