Investors interested in stocks from the Leisure and Recreation Services sector have probably already heard of Carnival (CCL) and Manchester United (MANU). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Carnival has a Zacks Rank of #2 (Buy), while Manchester United has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CCL is likely seeing its earnings outlook improve to a greater extent. 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.
CCL currently has a forward P/E ratio of 11.09, while MANU has a forward P/E of 677.33. We also note that CCL has a PEG ratio of 1.28. 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. MANU currently has a PEG ratio of 30.96.
Another notable valuation metric for CCL is its P/B ratio of 1.05. 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, MANU has a P/B of 1.61.
These metrics, and several others, help CCL earn a Value grade of A, while MANU has been given a Value grade of D.
CCL has seen stronger estimate revision activity and sports more attractive valuation metrics than MANU, so it seems like value investors will conclude that CCL is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Carnival Corporation (CCL) : Free Stock Analysis Report
Manchester United Ltd. (MANU) : Free Stock Analysis Report
To read this article on Zacks.com click here.