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.

Latest Pharmaceuticals Stock News

Before choosing which top Pharmaceuticals stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The outlook for the Pharmaceuticals sub-industry is positive as the world returns to normalcy and demand for electives and improved medical utilization. COVID-19 therapies, oncology and immunology are essential aspects of pharmaceutical companies. Should COVID-19 variants continue to arise getting a COVID-19 vaccine could become a seasonal phenomenon, much like the flu vaccine. If that were to happen, it would prove to be very lucrative for pharmaceutical companies, as it would generate recurring sales. Recent FDA recommendations, such as approval for a fourth booster dose for those aged 50 or older, suggests we may be moving in this direction. Generic drug makers are expected to continue to struggle due to lower-cost emerging market competition. Despite this, policy risks are on the rise. Lowering drug prices continues to be a bipartisan issue as both parties aim to offer Americans more affordable prices. While this provides uncertainty in the long-term, it is unlikely that legislation will get passed in the near future due to more pressing issues in the political agenda. Year to date through June 3, the S&P Pharmaceuticals Index was up 1.5% vs. a 13.6% decline for the S&P Composite 1500 Index. In 2021, the S&P Pharmaceuticals Index returned a gain of 21.8%, vs. a gain of 26.7% for the S&P Composite 1500.

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 19, 2023. 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 globally integrated healthcare services and products company. The Company is focused on 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 solutions. The Company's segments include Pharmaceutical and Medical. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products in the United States. The 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. The Company connects patients, providers, payers, pharmacists and manufacturers for integrated care coordination and patient management.

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 79, which is considered to be undervalued.

When you look at Cardinal Health Inc’s price-to-sales ratio at 0.11 compared to the industry median at 2.93, 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 48.96 compared to the industry median at 18.53. 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 8.3, when compared to the industry median of 10.9, 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 (2.89%). 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 18.70. 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.

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 94, 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 1.66.

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.

Hexo Corp’s Value Grade

Value Grade:

Hexo Corp. is a Canada-based consumer packaged goods cannabis company. The Company is engaged in cultivating, processing, packaging, and distributing cannabis products to serve the cannabis market. The Company serves the Canadian recreational market with a brand portfolio, including HEXO, Redecan, UP Cannabis, Original Stash, 48North, Trail Mix, Bake Sale and Latitude brands, and the medical market under HEXO medical cannabis in Canada and Israel. Its HEXO brand offers a range of flower strains, discreet capsules, and convenient vapes, including the HEXO FLVR lineup of flavor-first vapes, and HEXO Plus high potency flower, exclusive to Quebec. Its brand Namaste is a recreational cannabis brand for mindful consumers.

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.

Hexo Corp has a Value Score of 69, which is considered to be undervalued.

Hexo Corp’s price-to-book ratio is higher than its peers. This could make Hexo Corp less attractive for value investors when compared to the industry median at 1.66.

You can read more about Hexo Corp’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.

Procyon Corp’s Value Grade

Value Grade:

Procyon Corp operates through its subsidiaries AMERX Health Care Corporation (AMERX) and Sirius Medical Supply, Inc. (Sirius). Amerx develops and markets medical products used in the treatment of pressure ulcers, stasis ulcers, wounds, dermatitis, inflammation and other skin problems. Its product lines include AMERX, AMERIGEL, HELIX3 Bioactive Collagen, EXTREMIT-EASE Compression Garment and Advantagen Surgical Collagen. AMERX markets a line of AMERIGEL skin and wound care products made with Oakin, that promote healing in wound and problematic skin conditions, including AMERIGEL Hydrogel Wound Dressing, AMERIGEL Post Op Surgical Kits, AMERIGEL Saline Wound Wash, AMERIGEL Care Lotion, and AMERIGEL Barrier Lotion. AMERX include the HELIX3 Bioactive Collagen brand. HELIX3 is available in Collagen Powder and Collagen Matrix. Its wound care product includes AMERX Calcium Alginate Dressing, AMERX Foam Dressing, AMERX Gauze Dressing, AMERX Hyrdocolloid Dressing, and AMERX Wound Care Kits.

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.

Procyon Corp has a Value Score of 75, which is considered to be undervalued.

Procyon Corp’s price-to-book ratio is higher than its peers. This could make Procyon Corp less attractive for value investors when compared to the industry median at 1.66.

You can read more about Procyon Corp’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.

Qilian International Holding Group Ltd’s Value Grade

Value Grade:

Qilian International Holding Group Ltd is a China-based company mainly engaged in the development, manufacture, marketing and sale of licorice products, oxytetracycline products, traditional Chinese medicine derivatives (TCMD) product, heparin product, sausage casings and fertilizers. The Company operates through three segments: Oxytetracycline & Licorice Products and TCMD segment, Fertilizer segment and Heparin Products and Sausage Casing segment. Its main brand is Qilian Shan. The Company principally operates its businesses within the domestic market.

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.

Qilian International Holding Group Ltd has a Value Score of 65, which is considered to be undervalued.

Qilian International Holding Group Ltd’s price-earnings ratio is 32.5 compared to the industry median at 18.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Qilian International Holding Group Ltd less attractive for value investors.

Qilian International Holding Group Ltd’s price-to-book ratio is higher than its peers. This could make Qilian International Holding Group Ltd less attractive for value investors when compared to the industry median at 1.66.

You can read more about Qilian International Holding Group 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.

Teva Pharmaceutical Industries Ltd (ADR)’s Value Grade

Value Grade:

Teva Pharmaceutical Industries Ltd is a Israeli-based pharmaceutical company. The Company operates through three segments: North America, Europe and International Markets. Each business segment manages entire product portfolio in its region, including generics, specialty and over-the-counter (OTC) products. In addition to these three segments, The Company has other activities, primarily the sale of active pharmaceutical ingredients (API) to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis.

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.

Teva Pharmaceutical Industries Ltd (ADR) has a Value Score of 70, which is considered to be undervalued.

Teva Pharmaceutical Industries Ltd (ADR)’s price-to-book ratio is higher than its peers. This could make Teva Pharmaceutical Industries Ltd (ADR) less attractive for value investors when compared to the industry median at 1.66.

You can read more about Teva Pharmaceutical Industries Ltd (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.

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.
• Cumberland Pharmaceuticals, Inc. stock has a Value Grade of A.
• Hexo Corp stock has a Value Grade of B.
• Procyon Corp stock has a Value Grade of B.
• Qilian International Holding Group Ltd stock has a Value Grade of B.
• Teva Pharmaceutical Industries Ltd (ADR) 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 19
• Is Evofem Biosciences Inc (EVFMD) Stock a Good Investment?
• 7 Undervalued Pharmaceuticals Stocks for Thursday, May 18
• Why Bausch Health Companies Inc’s (BHC) Stock Is Up 14.59%

AAII Disclaimer

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