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

Zacks Equity Research

Investors looking for stocks in the Beverages - Soft drinks sector might want to consider either COCA-COLA HBC (CCHGY) or PepsiCo (PEP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, COCA-COLA HBC is sporting a Zacks Rank of #2 (Buy), while PepsiCo has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CCHGY likely has seen a stronger improvement to its earnings outlook than PEP has recently. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

CCHGY currently has a forward P/E ratio of 19.76, while PEP has a forward P/E of 23.98. We also note that CCHGY has a PEG ratio of 2.47. 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. PEP currently has a PEG ratio of 3.43.

Another notable valuation metric for CCHGY is its P/B ratio of 4.18. 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, PEP has a P/B of 12.94.

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

CCHGY sticks out from PEP in both our Zacks Rank and Style Scores models, so value investors will likely feel that CCHGY is the better option right now.

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