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Investors looking for stocks in the Retail - Supermarkets sector might want to consider either Tesco PLC (TSCDY) or Wal-Mart de Mexico SAB de CV (WMMVY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Tesco PLC and Wal-Mart de Mexico SAB de CV are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that TSCDY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
TSCDY currently has a forward P/E ratio of 13.60, while WMMVY has a forward P/E of 17.04. We also note that TSCDY has a PEG ratio of 1.81. 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. WMMVY currently has a PEG ratio of 2.07.
Another notable valuation metric for TSCDY is its P/B ratio of 2.24. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WMMVY has a P/B of 4.31.
These metrics, and several others, help TSCDY earn a Value grade of A, while WMMVY has been given a Value grade of C.
TSCDY sticks out from WMMVY in both our Zacks Rank and Style Scores models, so value investors will likely feel that TSCDY is the better option right now.
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Tesco PLC (TSCDY) : Free Stock Analysis Report
Wal-Mart de Mexico SAB de CV (WMMVY) : Free Stock Analysis Report