Investors interested in stocks from the Food - Miscellaneous sector have probably already heard of US Foods Holding Corp. (USFD) and Sysco (SYY). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
US Foods Holding Corp. has a Zacks Rank of #1 (Strong Buy), while Sysco has a Zacks Rank of #3 (Hold) right now. This means that USFD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
USFD currently has a forward P/E ratio of 17.33, while SYY has a forward P/E of 20.68. We also note that USFD has a PEG ratio of 1.86. 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. SYY currently has a PEG ratio of 2.17.
Another notable valuation metric for USFD is its P/B ratio of 2.52. 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, SYY has a P/B of 16.19.
These metrics, and several others, help USFD earn a Value grade of A, while SYY has been given a Value grade of C.
USFD sticks out from SYY in both our Zacks Rank and Style Scores models, so value investors will likely feel that USFD is the better option right now.
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