Investors looking for stocks in the Beverages - Alcohol sector might want to consider either Cervecerias Unidas (CCU) or Boston Beer (SAM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Cervecerias Unidas is sporting a Zacks Rank of #2 (Buy), while Boston Beer has a Zacks Rank of #4 (Sell). This means that CCU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CCU currently has a forward P/E ratio of 16.29, while SAM has a forward P/E of 22.45. We also note that CCU has a PEG ratio of 1.18. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SAM currently has a PEG ratio of 1.51.
Another notable valuation metric for CCU is its P/B ratio of 1.42. 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, SAM has a P/B of 2.55.
Based on these metrics and many more, CCU holds a Value grade of A, while SAM has a Value grade of C.
CCU stands above SAM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CCU is the superior value 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.
