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Investors interested in Consumer Products - Staples stocks are likely familiar with Ahold NV (ADRNY) and Grocery Outlet Holding Corp. (GO). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Ahold NV has a Zacks Rank of #2 (Buy), while Grocery Outlet Holding Corp. has a Zacks Rank of #3 (Hold). This means that ADRNY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
ADRNY currently has a forward P/E ratio of 12.36, while GO has a forward P/E of 41.39. We also note that ADRNY has a PEG ratio of 2.64. 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. GO currently has a PEG ratio of 3.67.
Another notable valuation metric for ADRNY is its P/B ratio of 1.67. 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, GO has a P/B of 4.04.
These are just a few of the metrics contributing to ADRNY's Value grade of A and GO's Value grade of C.
ADRNY 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 ADRNY is likely the superior value option right now.
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