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TAP vs. DEO: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors with an interest in Beverages - Alcohol stocks have likely encountered both Molson Coors Brewing (TAP) and Diageo (DEO). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Molson Coors Brewing is sporting a Zacks Rank of #1 (Strong Buy), while Diageo has a Zacks Rank of #5 (Strong Sell). This means that TAP'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.

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.

TAP currently has a forward P/E ratio of 8.86, while DEO has a forward P/E of 23.90. We also note that TAP has a PEG ratio of 1.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DEO currently has a PEG ratio of 3.51.

Another notable valuation metric for TAP is its P/B ratio of 0.53. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, DEO has a P/B of 7.79.

Based on these metrics and many more, TAP holds a Value grade of A, while DEO has a Value grade of D.

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


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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
 
Diageo plc (DEO) : Free Stock Analysis Report
 
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Zacks Investment Research