SJM or DANOY: Which Is the Better Value Stock Right Now?

Investors with an interest in Food - Miscellaneous stocks have likely encountered both Smucker (SJM) and Danone (DANOY). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Smucker and Danone are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SJM is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

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.

SJM currently has a forward P/E ratio of 12.37, while DANOY has a forward P/E of 18.38. We also note that SJM has a PEG ratio of 1.72. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DANOY currently has a PEG ratio of 2.81.

Another notable valuation metric for SJM is its P/B ratio of 2.37. 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, DANOY has a P/B of 2.74.

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

SJM sticks out from DANOY in both our Zacks Rank and Style Scores models, so value investors will likely feel that SJM is the better option right now.

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

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