Investors with an interest in Beverages - Soft drinks stocks have likely encountered both Coca-Cola FEMSA (KOF) and Coca-Cola European (CCEP). 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.
Coca-Cola FEMSA has a Zacks Rank of #2 (Buy), while Coca-Cola European has a Zacks Rank of #3 (Hold) right now. This means that KOF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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.
KOF currently has a forward P/E ratio of 18.18, while CCEP has a forward P/E of 19.98. We also note that KOF has a PEG ratio of 1.85. 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. CCEP currently has a PEG ratio of 2.23.
Another notable valuation metric for KOF is its P/B ratio of 1.90. 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, CCEP has a P/B of 3.79.
These metrics, and several others, help KOF earn a Value grade of A, while CCEP has been given a Value grade of C.
KOF 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 KOF is likely the superior value option right now.
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Coca Cola Femsa S.A.B. de C.V. (KOF) : Free Stock Analysis Report
Coca-Cola European Partners PLC (CCEP) : Free Stock Analysis Report
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