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.

Click the button below to learn more about A+ Investor and subscribe today.

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, August 09, 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.

Amylyx Pharmaceuticals Inc’s Value Grade

Value Grade:

Amylyx Pharmaceuticals, Inc. is a commercial-stage biopharmaceutical company. The Company is engaged in the discovery and development of treatments for neurodegenerative diseases. The Company is focused on the development and commercialization of its product candidate: AMX0035 for the treatment of Wolfram syndrome and for the treatment of progressive supranuclear palsy, and AMX0114, the Company’s antisense oligonucleotide targeting calpain-2 for the treatment of amyotrophic lateral sclerosis (ALS). AMX0035 is a dual-unfolded protein response (UPR)-Bax apoptosis inhibitor composed of PB and TURSO (also known as TUDCA). The Company’s Avexitide is an investigational, first-in-class glucagon-like peptide-1 (GLP-1) receptor antagonist that has been evaluated in five clinical trials for post-bariatric hypoglycemia (PBH) and has also been studied in congenital hyperinsulinism (HI), two indications characterized by hyperinsulinemic hypoglycemia.

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.

Amylyx Pharmaceuticals Inc has a Value Score of 94, which is considered to be undervalued.

When you look at Amylyx Pharmaceuticals Inc’s price-to-sales ratio at 0.31 compared to the industry median at 2.67, this company has a lower price relative to revenue compared to its peers. This could make Amylyx Pharmaceuticals Inc’s stock more attractive for value investors.

Now, let’s assess Amylyx Pharmaceuticals Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 1.8, when compared to the industry median of 11.0, 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. Amylyx Pharmaceuticals Inc’s shareholder yield is higher than its industry median ratio of (3.05%). 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. Amylyx Pharmaceuticals Inc’s price-to-book ratio is lower than its industry median ratio of 2.32. This could make Amylyx Pharmaceuticals Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Amylyx Pharmaceuticals Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Amylyx Pharmaceuticals Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 21.55. This could make Amylyx Pharmaceuticals Inc more attractive because the lower P/FCF ratio indicates that Amylyx Pharmaceuticals 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.

Aytu Biopharma Inc’s Value Grade

Value Grade:

Aytu BioPharma, Inc. is a pharmaceutical company focused on commercializing novel therapeutics. The Company’s Rx Segment consists of prescription pharmaceutical products sold primarily through third party wholesalers. The Rx Segment primarily consists of two product portfolios: attention deficit hyperactivity disorder (ADHD) Portfolio and Pediatric Portfolio. The Company's prescription products include Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets and Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets for the treatment of ADHD, Karbinal ER (carbinoxamine maleate), an extended-release antihistamine suspension indicated to treat numerous allergic conditions, and Poly-Vi-Flor and Tri-Vi-Flor, two complementary fluoride-based prescription vitamin product lines available in various formulations for infants and children with fluoride deficiency.

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.

Aytu Biopharma Inc has a Value Score of 94, which is considered to be undervalued.

Aytu Biopharma Inc’s price-to-book ratio is higher than its peers. This could make Aytu Biopharma Inc less attractive for value investors when compared to the industry median at 2.32.

You can read more about Aytu 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.

Bayer AG (ADR)’s Value Grade

Value Grade:

Bayer AG is a German-based life science company. The Company's segments are Crop Science, Pharmaceuticals and Consumer Health. The Crop Science segment focuses on seeds, improved plant traits, chemical and biological crop protection products, digital solutions and customer service for sustainable agriculture. The Pharmaceuticals segment focuses on prescription products, especially for cardiology and women's healthcare and specialty therapeutics focused on the areas of cardiology, oncology, hematology and ophthalmology, as well as gene therapy and others. The Consumer Health segment develops, produces and markets nonprescription over-the-counter medicines for self-medication. Its Consumer Health segment portfolio consists of products in dermatology, dietary supplement, analgesic, gastrointestinal, cold, allergy, sinus and flu, foot care and sun protection categories, among 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.

Bayer AG (ADR) has a Value Score of 94, which is considered to be undervalued.

Bayer AG (ADR)’s price-to-book ratio is higher than its peers. This could make Bayer AG (ADR) less attractive for value investors when compared to the industry median at 2.32.

You can read more about Bayer AG (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.

Bon Natural Life Ltd’s Value Grade

Value Grade:

Bon Natural Life Ltd is a China-based company principally engaged in the manufacturing and sales of personal care ingredients, such as plant extracted fragrance compounds to perfume and fragrance manufacturers, natural health supplements, such as powder drinks and bioactive food ingredient products mostly used as food additives and nutritional supplements. The Company's product categories include fragrance compounds, health supplements (natural, functional active ingredients for powder drinks) and bioactive food ingredients. Fragrance compounds product category includes clary sage extract products. Bioactive food ingredients include stachyose, milk thistle extracts, apple extracts, phloretin and pomegranate extract products. The Company’s products are applied in the functional food, personal care, cosmetic and pharmaceutical industries.

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.

Bon Natural Life Ltd has a Value Score of 96, which is considered to be undervalued.

Bon Natural Life Ltd’s price-earnings ratio is 0.4 compared to the industry median at 25.7. This means that it has a lower price relative to its earnings compared to its peers. This makes Bon Natural Life Ltd more attractive for value investors.

Bon Natural Life Ltd’s price-to-book ratio is higher than its peers. This could make Bon Natural Life Ltd less attractive for value investors when compared to the industry median at 2.32.

You can read more about Bon Natural Life Ltd’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.

Cara Therapeutics Inc’s Value Grade

Value Grade:

Cara Therapeutics, Inc. is a development-stage biopharmaceutical company. The Company is focused on treatment paradigm to improve the lives of patients suffering from chronic pruritus. It is developing an oral formulation of difelikefalin, a selective, predominantly peripherally acting, non-scheduled Kappa opioid receptor agonist, for the treatment of chronic neuropathic pruritus associated with Notalgia Paresthetica (NP), a common, underdiagnosed neuropathy affecting the upper back. It is conducting Phase II/III Clinical Program in NP. The program is comprised of two studies - KOURAGE 1 and KOURAGE 2, which are double-blind, placebo-controlled, eight-week studies with patients allowed to roll-over into open-label 52-week extensions. It has developed an IV formulation of difelikefalin, for the treatment of moderate-to-severe pruritus associated with advanced chronic kidney disease in adults undergoing hemodialysis. The IV formulation is out-licensed worldwide.

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.

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

Cara Therapeutics Inc’s price-to-book ratio is higher than its peers. This could make Cara Therapeutics Inc less attractive for value investors when compared to the industry median at 2.32.

You can read more about Cara 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.

cbdMD Inc’s Value Grade

Value Grade:

cbdMD, Inc. produces and distributes cannabidiol (CBD) products. The Company owns and operates CBD brands cbdMD, Paw CBD and cbdMD Botanicals. Its cbdMD brand of products includes a range of premium every day and functional CBD products, including tinctures; gummies; topicals; capsules; drink mixes; and sleep, focus and calming aids.Its Paw CBD brand of products includes a line of veterinarian-formulated products including tinctures, chews, topicals products in varying strengths and formulas. Its cbdMD Botanicals brand of beauty and skincare products features facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care stock-keeping units (SKU). cbdMD, Paw CBD and cbdMD Botanicals products are distributed through its e-commerce websites, third party ecommerce sites, select distributors and marketing partners as well as a variety of brick-and-mortar retailers. Its products are sold through www.cbdmd.com, www.pawcbd.com, and cbdmdbotanicals.com Websites.

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.

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

cbdMD Inc’s price-to-book ratio is higher than its peers. This could make cbdMD Inc less attractive for value investors when compared to the industry median at 2.32.

You can read more about cbdMD 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.

• Amylyx Pharmaceuticals Inc stock has a Value Grade of A.
• Aytu Biopharma Inc stock has a Value Grade of A.
• Bayer AG (ADR) stock has a Value Grade of A.
• Bon Natural Life Ltd stock has a Value Grade of A.
• Cara Therapeutics Inc stock has a Value Grade of B.
• cbdMD 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, August 09
• 3 Undervalued Pharmaceuticals Stocks for Thursday, August 08
• What You Need to Know About Anika Therapeutics Inc's Q2 Earnings
• What You Need to Know About Avadel Pharmaceuticals PLC (ADR)'s Q2 Earnings

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.