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PFGC vs. SOVO: Which Stock Is the Better Value Option?

Investors interested in Food - Natural Foods Products stocks are likely familiar with Performance Food Group (PFGC) and Sovos Brands, Inc. (SOVO). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Performance Food Group has a Zacks Rank of #2 (Buy), while Sovos Brands, Inc. has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PFGC is likely seeing its earnings outlook improve to a greater extent. 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.

PFGC currently has a forward P/E ratio of 19.26, while SOVO has a forward P/E of 24.10. We also note that PFGC 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. SOVO currently has a PEG ratio of 2.33.

Another notable valuation metric for PFGC is its P/B ratio of 2.43. 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, SOVO has a P/B of 2.97.

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

PFGC has seen stronger estimate revision activity and sports more attractive valuation metrics than SOVO, so it seems like value investors will conclude that PFGC is the superior option right now.


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