Investors interested in Beverages - Soft drinks stocks are likely familiar with Coca-Cola European (CCEP) and Coca-Cola (KO). But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Coca-Cola European and Coca-Cola are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CCEP likely has seen a stronger improvement to its earnings outlook than KO has recently. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
CCEP currently has a forward P/E ratio of 17.38, while KO has a forward P/E of 22.22. We also note that CCEP has a PEG ratio of 3.36. 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. KO currently has a PEG ratio of 3.54.
Another notable valuation metric for CCEP is its P/B ratio of 3.82. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, KO has a P/B of 9.66.
These are just a few of the metrics contributing to CCEP's Value grade of B and KO's Value grade of D.
CCEP stands above KO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CCEP is the superior value option right now.
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