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Investors interested in stocks from the Beverages - Soft drinks sector have probably already heard of Coca-Cola FEMSA (KOF) and Coca-Cola (KO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, both Coca-Cola FEMSA and Coca-Cola are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
KOF currently has a forward P/E ratio of 14.99, while KO has a forward P/E of 24.87. We also note that KOF has a PEG ratio of 1.21. 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. KO currently has a PEG ratio of 3.44.
Another notable valuation metric for KOF is its P/B ratio of 1.73. 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, KO has a P/B of 11.38.
Based on these metrics and many more, KOF holds a Value grade of A, while KO has a Value grade of D.
Both KOF and KO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KOF is the superior value option right now.
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