ABEV or DEO: Which Is the Better Value Stock Right Now?

Investors interested in Beverages - Alcohol stocks are likely familiar with Ambev (ABEV) and Diageo (DEO). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Ambev has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ABEV likely has seen a stronger improvement to its earnings outlook than DEO has recently. 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.

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 20.07, while DEO has a forward P/E of 27.42. We also note that ABEV has a PEG ratio of 2.55. 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. DEO currently has a PEG ratio of 3.15.

Another notable valuation metric for ABEV is its P/B ratio of 3.14. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, DEO has a P/B of 9.42.

These metrics, and several others, help ABEV earn a Value grade of B, while DEO has been given a Value grade of D.

ABEV is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ABEV is likely the superior value option right now.

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Ambev S.A. (ABEV) : Free Stock Analysis Report
 
Diageo plc (DEO) : Free Stock Analysis Report
 
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