Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Cervecerias Unidas (CCU) and Campari Group (DVDCY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Cervecerias Unidas is sporting a Zacks Rank of #1 (Strong Buy), while Campari Group has a Zacks Rank of #4 (Sell). This means that CCU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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 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.
CCU currently has a forward P/E ratio of 20.29, while DVDCY has a forward P/E of 36.42. We also note that CCU has a PEG ratio of 0.37. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DVDCY currently has a PEG ratio of 4.86.
Another notable valuation metric for CCU is its P/B ratio of 2.38. 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, DVDCY has a P/B of 4.53.
These are just a few of the metrics contributing to CCU's Value grade of B and DVDCY's Value grade of F.
CCU 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 CCU is likely the superior value option right now.
Compania Cervecerias Unidas, S.A. (CCU): Free Stock Analysis Report
Campari Group (DVDCY): Free Stock Analysis Report
Original post