Investors interested in stocks from the Food - Meat Products sector have probably already heard of Pilgrim's Pride (PPC) and Hormel Foods (HRL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Pilgrim's Pride is sporting a Zacks Rank of #1 (Strong Buy), while Hormel Foods 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 PPC 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 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
PPC currently has a forward P/E ratio of 13.26, while HRL has a forward P/E of 25.17. We also note that PPC has a PEG ratio of 0.59. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HRL currently has a PEG ratio of 4.16.
Another notable valuation metric for PPC is its P/B ratio of 3.46. 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, HRL has a P/B of 3.99.
Based on these metrics and many more, PPC holds a Value grade of B, while HRL has a Value grade of C.
PPC 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 PPC is likely the superior value option right now.
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