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Investors interested in Beverages - Alcohol stocks are likely familiar with Constellation Brands (STZ) and Diageo (DEO). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Constellation Brands has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STZ has an improving earnings outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
STZ currently has a forward P/E ratio of 17.65, while DEO has a forward P/E of 19.01. We also note that STZ has a PEG ratio of 1.70. 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 3.73.
Another notable valuation metric for STZ is its P/B ratio of 5.35. 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, DEO has a P/B of 6.05.
These are just a few of the metrics contributing to STZ's Value grade of B and DEO's Value grade of D.
STZ sticks out from DEO in both our Zacks Rank and Style Scores models, so value investors will likely feel that STZ is the better option right now.
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Constellation Brands Inc (STZ) : Free Stock Analysis Report
Diageo plc (DEO) : Free Stock Analysis Report