ABEV vs. DEO: Which Stock Is the Better Value Option?
Investors interested in Beverages - Alcohol stocks are likely familiar with Ambev (ABEV) and Diageo (DEO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Ambev is sporting a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #4 (Sell). 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 piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ABEV currently has a forward P/E ratio of 19.09, while DEO has a forward P/E of 20.64. We also note that ABEV has a PEG ratio of 2.65. 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 2.81.
Another notable valuation metric for ABEV is its P/B ratio of 2.98. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, DEO has a P/B of 8.69.
These metrics, and several others, help ABEV earn a Value grade of B, while DEO has been given a Value grade of D.
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
