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K vs. MKC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors with an interest in Food - Miscellaneous stocks have likely encountered both Kellogg (K) and McCormick (MKC). 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.

Currently, Kellogg has a Zacks Rank of #2 (Buy), while McCormick has a Zacks Rank of #3 (Hold). This means that K's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

K currently has a forward P/E ratio of 16.40, while MKC has a forward P/E of 33.98. We also note that K has a PEG ratio of 2.73. 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. MKC currently has a PEG ratio of 6.13.

Another notable valuation metric for K is its P/B ratio of 6.53. 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, MKC has a P/B of 6.56.

These are just a few of the metrics contributing to K's Value grade of B and MKC's Value grade of D.

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


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Kellogg Company (K) : Free Stock Analysis Report
 
McCormick Company, Incorporated (MKC) : Free Stock Analysis Report
 
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