ABEV vs. DEO: Which Stock Is the Better Value Option?
Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Ambev (ABEV) and Diageo (DEO). But which of these two stocks presents investors with the better value opportunity right now? 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.
Ambev and Diageo are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that ABEV likely has seen a stronger improvement to its earnings outlook than DEO has recently. However, value investors will care about much more than just this.
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 17.21, while DEO has a forward P/E of 20.21. We also note that ABEV has a PEG ratio of 2.45. 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 2.98.
Another notable valuation metric for ABEV is its P/B ratio of 2.56. 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, DEO has a P/B of 8.50.
These are just a few of the metrics contributing to ABEV's Value grade of B and DEO's Value grade of C.
ABEV has seen stronger estimate revision activity and sports more attractive valuation metrics than DEO, so it seems like value investors will conclude that ABEV is the superior option right now.
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Ambev S.A. (ABEV) : Free Stock Analysis Report
Diageo plc (DEO) : Free Stock Analysis Report
