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GIS vs. LW: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors interested in Food - Miscellaneous stocks are likely familiar with General Mills (GIS) and Lamb Weston (LW). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, General Mills has a Zacks Rank of #2 (Buy), while Lamb Weston has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GIS has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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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.

GIS currently has a forward P/E ratio of 16.42, while LW has a forward P/E of 36.51. We also note that GIS has a PEG ratio of 2.19. 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. LW currently has a PEG ratio of 3.54.

Another notable valuation metric for GIS is its P/B ratio of 3.78. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LW has a P/B of 19.68.

These metrics, and several others, help GIS earn a Value grade of B, while LW has been given a Value grade of C.

GIS has seen stronger estimate revision activity and sports more attractive valuation metrics than LW, so it seems like value investors will conclude that GIS is the superior option right now.


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General Mills, Inc. (GIS) : Free Stock Analysis Report
 
Lamb Weston (LW) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.