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GIS vs. CPB: Which Stock Is the Better Value Option?

Lions Gate (LGF.A) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors looking for stocks in the Food - Miscellaneous sector might want to consider either General Mills (GIS) or Campbell Soup (CPB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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, General Mills is sporting a Zacks Rank of #2 (Buy), while Campbell Soup 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 GIS 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 also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

GIS currently has a forward P/E ratio of 13.51, while CPB has a forward P/E of 15.71. We also note that GIS has a PEG ratio of 1.74. 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. CPB currently has a PEG ratio of 2.66.

Another notable valuation metric for GIS is its P/B ratio of 3.84. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CPB has a P/B of 8.33.

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

GIS stands above CPB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GIS is the superior value option right now.


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