Investors looking for stocks in the Consumer Products - Staples sector might want to consider either Albertsons Companies, Inc. (ACI) or Colgate-Palmolive (CL). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Albertsons Companies, Inc. has a Zacks Rank of #2 (Buy), while Colgate-Palmolive has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that ACI likely has seen a stronger improvement to its earnings outlook than CL has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ACI currently has a forward P/E ratio of 8.03, while CL has a forward P/E of 19.99. We also note that ACI has a PEG ratio of 2.62. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CL currently has a PEG ratio of 5.21.
Another notable valuation metric for ACI is its P/B ratio of 3.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CL has a P/B of 50.09.
These are just a few of the metrics contributing to ACI's Value grade of A and CL's Value grade of D.
ACI sticks out from CL in both our Zacks Rank and Style Scores models, so value investors will likely feel that ACI is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
