Investors with an interest in Agriculture - Operations stocks have likely encountered both Archer Daniels Midland (ADM) and Corteva, Inc. (CTVA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Archer Daniels Midland and Corteva, Inc. are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ADM is likely seeing its earnings outlook improve to a greater extent. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ADM currently has a forward P/E ratio of 16.17, while CTVA has a forward P/E of 22.16. We also note that ADM has a PEG ratio of 0.86. 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. CTVA currently has a PEG ratio of 2.75.
Another notable valuation metric for ADM is its P/B ratio of 1.48. 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, CTVA has a P/B of 2.23.
These metrics, and several others, help ADM earn a Value grade of A, while CTVA has been given a Value grade of C.
ADM 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 ADM is likely the superior value option right now.
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See Stocks Now >>Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
Corteva, Inc. (CTVA) : Free Stock Analysis Report
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.
