Investors with an interest in Beverages - Alcohol stocks have likely encountered both Heineken NV (HEINY) and Pernod Ricard SA (PRNDY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Heineken NV and Pernod Ricard SA are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that HEINY'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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HEINY currently has a forward P/E ratio of 19.34, while PRNDY has a forward P/E of 22.08. We also note that HEINY has a PEG ratio of 1.88. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PRNDY currently has a PEG ratio of 1.89.
Another notable valuation metric for HEINY is its P/B ratio of 2.74. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, PRNDY has a P/B of 3.24.
Based on these metrics and many more, HEINY holds a Value grade of B, while PRNDY has a Value grade of D.
HEINY sticks out from PRNDY in both our Zacks Rank and Style Scores models, so value investors will likely feel that HEINY is the better option right now.
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