Investors interested in stocks from the Consumer Products - Staples sector have probably already heard of Ahold NV (ADRNY) and Colgate-Palmolive (CL). 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ahold NV and Colgate-Palmolive are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that ADRNY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
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.
ADRNY currently has a forward P/E ratio of 13.52, while CL has a forward P/E of 23.05. We also note that ADRNY has a PEG ratio of 1.67. 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. CL currently has a PEG ratio of 4.41.
Another notable valuation metric for ADRNY is its P/B ratio of 2.29. 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, CL has a P/B of 65.08.
Based on these metrics and many more, ADRNY holds a Value grade of A, while CL has a Value grade of C.
ADRNY sticks out from CL in both our Zacks Rank and Style Scores models, so value investors will likely feel that ADRNY is the better option right now.
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Ahold NV (ADRNY): Free Stock Analysis Report Colgate-Palmolive Company (CL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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