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Investors interested in stocks from the Food - Natural Foods Products sector have probably already heard of Performance Food Group (PFGC) and Sprouts Farmers (SFM). 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.
Performance Food Group and Sprouts Farmers are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, 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. 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 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 18.75, while SFM has a forward P/E of 34.85. We also note that PFGC has a PEG ratio of 0.96. 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. SFM currently has a PEG ratio of 1.94.
Another notable valuation metric for PFGC is its P/B ratio of 3.29. 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, SFM has a P/B of 10.92.
These are just a few of the metrics contributing to PFGC's Value grade of B and SFM's Value grade of C.
PFGC sticks out from SFM in both our Zacks Rank and Style Scores models, so value investors will likely feel that PFGC is the better option right now.
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Performance Food Group Company (PFGC) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report