Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Cervecerias Unidas (CCU) and Boston Beer (SAM). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Cervecerias Unidas has a Zacks Rank of #2 (Buy), while Boston Beer has a Zacks Rank of #3 (Hold). This means that CCU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CCU currently has a forward P/E ratio of 18.44, while SAM has a forward P/E of 25.57. We also note that CCU has a PEG ratio of 1.33. 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. SAM currently has a PEG ratio of 1.71.
Another notable valuation metric for CCU is its P/B ratio of 1.61. 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, SAM has a P/B of 2.96.
These are just a few of the metrics contributing to CCU's Value grade of A and SAM's Value grade of C.
CCU has seen stronger estimate revision activity and sports more attractive valuation metrics than SAM, so it seems like value investors will conclude that CCU is the superior option right now.
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Compania Cervecerias Unidas, S.A. (CCU): Free Stock Analysis Report The Boston Beer Company, Inc. (SAM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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