Investors with an interest in Food - Natural Foods Products stocks have likely encountered both Performance Food Group (PFGC) and Sprouts Farmers (SFM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Performance Food Group has a Zacks Rank of #2 (Buy), while Sprouts Farmers has a Zacks Rank of #3 (Hold) 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 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 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 19.39, while SFM has a forward P/E of 32.72. We also note that PFGC has a PEG ratio of 1.39. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SFM currently has a PEG ratio of 2.08.
Another notable valuation metric for PFGC is its P/B ratio of 3.53. 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, SFM has a P/B of 12.63.
These are just a few of the metrics contributing to PFGC's Value grade of B and SFM's Value grade of C.
PFGC stands above SFM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PFGC is the superior value option right now.
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Performance Food Group Company (PFGC): Free Stock Analysis Report Sprouts Farmers Market, Inc. (SFM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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