Investors interested in stocks from the Beverages - Soft drinks sector have probably already heard of Fomento Economico (FMX) and Monster Beverage (MNST). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Fomento Economico is sporting a Zacks Rank of #1 (Strong Buy), while Monster Beverage has a Zacks Rank of #3 (Hold). This means that FMX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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 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.
FMX currently has a forward P/E ratio of 21.98, while MNST has a forward P/E of 40.19. We also note that FMX has a PEG ratio of 0.73. 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. MNST currently has a PEG ratio of 3.06.
Another notable valuation metric for FMX is its P/B ratio of 2.62. 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, MNST has a P/B of 10.41.
These metrics, and several others, help FMX earn a Value grade of B, while MNST has been given a Value grade of F.
FMX stands above MNST thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FMX is the superior value option right now.
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Fomento Economico Mexicano S.A.B. de C.V. (FMX): Free Stock Analysis Report
Monster Beverage Corporation (MNST): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).