Investors looking for stocks in the Consumer Products - Staples sector might want to consider either Grocery Outlet Holding Corp. (GO) or Kimberly-Clark (KMB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Grocery Outlet Holding Corp. has a Zacks Rank of #2 (Buy), while Kimberly-Clark has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GO has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
GO currently has a forward P/E ratio of 17.47, while KMB has a forward P/E of 18.20. We also note that GO has a PEG ratio of 3.53. 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. KMB currently has a PEG ratio of 4.37.
Another notable valuation metric for GO is its P/B ratio of 1.07. 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, KMB has a P/B of 34.95.
Based on these metrics and many more, GO holds a Value grade of B, while KMB has a Value grade of C.
GO stands above KMB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GO 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.
