Investors with an interest in Food - Miscellaneous stocks have likely encountered both Conagra Brands (CAG) and Mondelez (MDLZ). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Conagra Brands has a Zacks Rank of #2 (Buy), while Mondelez has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that CAG likely has seen a stronger improvement to its earnings outlook than MDLZ has recently. 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.
CAG currently has a forward P/E ratio of 13.88, while MDLZ has a forward P/E of 23.03. We also note that CAG has a PEG ratio of 2.18. 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. MDLZ currently has a PEG ratio of 2.95.
Another notable valuation metric for CAG is its P/B ratio of 2.04. 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, MDLZ has a P/B of 3.68.
These metrics, and several others, help CAG earn a Value grade of B, while MDLZ has been given a Value grade of C.
CAG has seen stronger estimate revision activity and sports more attractive valuation metrics than MDLZ, so it seems like value investors will conclude that CAG is the superior option right now.
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