Investors looking for stocks in the Food - Miscellaneous sector might want to consider either Kellogg (K) or Lamb Weston (LW). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Kellogg has a Zacks Rank of #2 (Buy), while Lamb Weston has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that K has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
K currently has a forward P/E ratio of 17.57, while LW has a forward P/E of 28.61. We also note that K has a PEG ratio of 4.59. 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. LW currently has a PEG ratio of 8.41.
Another notable valuation metric for K is its P/B ratio of 7.14. 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, LW has a P/B of 34.46.
Based on these metrics and many more, K holds a Value grade of B, while LW has a Value grade of C.
K has seen stronger estimate revision activity and sports more attractive valuation metrics than LW, so it seems like value investors will conclude that K is the superior option right now.
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Kellogg Company (K): Free Stock Analysis Report
Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report
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