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 Tuesday, September 17, 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.

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 93, which is considered to be undervalued.

When you look at Aytu Biopharma Inc’s price-to-sales ratio at 0.15 compared to the industry median at 3.02, this company has a lower price relative to revenue compared to its peers. This could make Aytu Biopharma Inc’s stock more attractive for value investors.

Now, let’s assess Aytu Biopharma Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 1.3, when compared to the industry median of 11.5, 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. Aytu Biopharma Inc’s shareholder yield is lower than its industry median ratio of (2.57%). 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. Aytu Biopharma Inc’s price-to-book ratio is lower than its industry median ratio of 2.54. This could make Aytu Biopharma Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Aytu Biopharma Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Aytu Biopharma Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 21.57. This could make Aytu Biopharma Inc more attractive because the lower P/FCF ratio indicates that Aytu Biopharma 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.

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 and Global Medical Products and Distribution (GMPD). The Pharmaceutical and Specialty Solutions segment distributes branded and generic pharmaceuticals, specialty pharmaceuticals and over-the-counter healthcare and consumer products in the United States. Its 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. The Company connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination.

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 81, which is considered to be undervalued.

Cardinal Health Inc’s price-earnings ratio is 32.7 compared to the industry median at 27.6. 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.

Guardion Health Sciences Inc’s Value Grade

Value Grade:

Guardion Health Sciences, Inc. is a clinical nutrition company. The Company offers a portfolio of science-based, clinically supported products designed to support the health needs of consumers, healthcare professionals and providers and their patients. The Company sells two ocular products: GlaucoCetin and Lumega-Z. GlaucoCetin is a dietary supplement in a capsule form designed specifically to provide nutrients to support mitochondrial function with additional antioxidants to help reduce oxidative stress and increase blood flow throughout the body for enhanced eye support and ocular health. Lumega-Z, its medical food product, has a formula designed to replenish and restore the macular protective pigment, simultaneously delivering critical and essential nutrients to the eye. As a medical food, Lumega-Z must be administered under the supervision of a physician or professional healthcare provider. It sells GlaucoCetin and Lumega-Z on its Website, guardionhealth.com.

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.

Guardion Health Sciences Inc has a Value Score of 72, which is considered to be undervalued.

Guardion Health Sciences Inc’s price-to-book ratio is higher than its peers. This could make Guardion Health Sciences Inc less attractive for value investors when compared to the industry median at 2.54.

You can read more about Guardion Health Sciences 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 a global healthcare company, which is engaged in developing and producing stabilized hypochlorous acid (HOCl), products for a range of applications, including wound care, eye care, oral care, dermatological conditions, podiatry, animal health care and non-toxic disinfectants. The Company's product offerings include Lumacyn Clarifying Mist; Regenacyn Advanced Scar Gel; Reliefacyn Advanced Itch-Burn-Rash-Pain Relief Hydrogel; Microcyn OTC Advanced Wound & Skin Cleanser; Podiacyn Advanced Everyday Foot Care, MicrocynAH and others. Lumacyn Clarifying Mist is intended for use as a daily skin toner, to soothe and cleanse the skin, reduce redness, and manage blemishes by reducing infection. Podiacyn is intended for management of foot odors, infections, and irritations, as well as daily foot health and hygiene. MicrocynAH is an 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 61, 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 2.54.

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 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.

• Aytu Biopharma Inc stock has a Value Grade of A.
• Cardinal Health Inc stock has a Value Grade of A.
• Guardion Health Sciences Inc stock has a Value Grade of B.
• Sonoma Pharmaceuticals Inc 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 Tuesday, September 17
• 3 Undervalued Pharmaceuticals Stocks for Monday, September 16
• Why Bausch Health Companies Inc’s (BHC) Stock Is Up 10.76%
• Why Biomarin Pharmaceutical Inc’s (BMRN) Stock Is Down 17.71%

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.