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 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 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, both Performance Food Group and Sprouts Farmers are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
PFGC currently has a forward P/E ratio of 19.22, while SFM has a forward P/E of 28.98. We also note that PFGC has a PEG ratio of 1.36. 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 1.74.
Another notable valuation metric for PFGC is its P/B ratio of 3.51. 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 10.86.
These metrics, and several others, help PFGC earn a Value grade of B, while SFM has been given a Value grade of C.
Both PFGC and SFM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we 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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