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Investors looking for stocks in the Beverages - Alcohol sector might want to consider either Molson Coors Brewing (TAP) or Diageo (DEO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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 #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TAP has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
TAP currently has a forward P/E ratio of 9.48, while DEO has a forward P/E of 16.49. We also note that TAP has a PEG ratio of 1.51. 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 2.36.
Another notable valuation metric for TAP is its P/B ratio of 0.93. 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 4.78.
These metrics, and several others, help TAP earn a Value grade of A, while DEO has been given a Value grade of C.
TAP sticks out from DEO in both our Zacks Rank and Style Scores models, so value investors will likely feel that TAP is the better option right now.
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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
Diageo plc (DEO) : Free Stock Analysis Report