NWL vs. GO: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Consumer Products - Staples sector might want to consider either Newell Brands (NWL) or Grocery Outlet Holding Corp. (GO). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Newell Brands has a Zacks Rank of #2 (Buy), while Grocery Outlet Holding Corp. has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NWL is likely seeing its earnings outlook improve to a greater extent. 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.
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.
NWL currently has a forward P/E ratio of 11.53, while GO has a forward P/E of 43.17. We also note that NWL has a PEG ratio of 1.92. 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. GO currently has a PEG ratio of 3.83.
Another notable valuation metric for NWL is its P/B ratio of 1.96. 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, GO has a P/B of 3.84.
These are just a few of the metrics contributing to NWL's Value grade of A and GO's Value grade of C.
NWL has seen stronger estimate revision activity and sports more attractive valuation metrics than GO, so it seems like value investors will conclude that NWL is the superior option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.