ABEV vs. BF.B: Which Stock Is the Better Value Option?

Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Ambev (ABEV) and Brown-Forman B (BF.B). 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, both Ambev and Brown-Forman B are holding 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. 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

ABEV currently has a forward P/E ratio of 14.34, while BF.B has a forward P/E of 17.17. We also note that ABEV has a PEG ratio of 2.73. 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. BF.B currently has a PEG ratio of 10.47.

Another notable valuation metric for ABEV is its P/B ratio of 2.32. 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, BF.B has a P/B of 3.39.

These are just a few of the metrics contributing to ABEV's Value grade of B and BF.B's Value grade of D.

Both ABEV and BF.B are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ABEV is the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research