Investors interested in stocks from the Food - Miscellaneous sector have probably already heard of Nomad Foods (NOMD) and MGP (MGPI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Nomad Foods and MGP are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that NOMD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
NOMD currently has a forward P/E ratio of 14.87, while MGPI has a forward P/E of 34.86. We also note that NOMD has a PEG ratio of 0.99. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MGPI currently has a PEG ratio of 2.32.
Another notable valuation metric for NOMD is its P/B ratio of 1.49. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, MGPI has a P/B of 6.76.
Based on these metrics and many more, NOMD holds a Value grade of B, while MGPI has a Value grade of D.
NOMD is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NOMD is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nomad Foods Limited (NOMD): Free Stock Analysis Report MGP Ingredients, Inc. (MGPI): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research