Investors interested in Beverages - Alcohol stocks are likely familiar with Pernod Ricard SA (PRNDY) and Constellation Brands (STZ). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Right now, Pernod Ricard SA is sporting a Zacks Rank of #2 (Buy), while Constellation Brands has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PRNDY has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PRNDY currently has a forward P/E ratio of 20.32, while STZ has a forward P/E of 21.78. We also note that PRNDY has a PEG ratio of 1.51. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. STZ currently has a PEG ratio of 2.04.
Another notable valuation metric for PRNDY is its P/B ratio of 2.82. 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, STZ has a P/B of 4.56.
These metrics, and several others, help PRNDY earn a Value grade of B, while STZ has been given a Value grade of C.
PRNDY stands above STZ thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PRNDY is the superior value option right now.
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