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CCEP vs. CCHGY: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in stocks from the Beverages - Soft drinks sector have probably already heard of Coca-Cola European (CCEP) and COCA-COLA HBC (CCHGY). 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.

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, Coca-Cola European is sporting a Zacks Rank of #2 (Buy), while COCA-COLA HBC has a Zacks Rank of #4 (Sell). This means that CCEP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CCEP currently has a forward P/E ratio of 15.01, while CCHGY has a forward P/E of 19.54. We also note that CCEP has a PEG ratio of 1.72. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CCHGY currently has a PEG ratio of 2.44.

Another notable valuation metric for CCEP is its P/B ratio of 2.72. 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, CCHGY has a P/B of 3.35.

These are just a few of the metrics contributing to CCEP's Value grade of B and CCHGY's Value grade of C.

CCEP 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 CCEP is likely the superior value option right now.


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