ABEV vs. DEO: Which Stock Is the Better Value Option?
Investors with an interest in Beverages - Alcohol stocks have likely encountered both Ambev (ABEV) and Diageo (DEO). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Ambev has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ABEV 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 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.
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.
ABEV currently has a forward P/E ratio of 18.39, while DEO has a forward P/E of 21.67. We also note that ABEV has a PEG ratio of 2.02. 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. DEO currently has a PEG ratio of 2.51.
Another notable valuation metric for ABEV is its P/B ratio of 2.57. 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, DEO has a P/B of 8.87.
These metrics, and several others, help ABEV earn a Value grade of B, while DEO has been given a Value grade of C.
ABEV is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ABEV is likely the superior value option right now.
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Ambev S.A. (ABEV) : Free Stock Analysis Report
Diageo plc (DEO) : Free Stock Analysis Report
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