Investors looking for stocks in the Beverages - Soft drinks sector might want to consider either Fomento Economico (FMX) or 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Fomento Economico has a Zacks Rank of #1 (Strong Buy), while Monster Beverage has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FMX is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
FMX currently has a forward P/E ratio of 20.89, while MNST has a forward P/E of 42.20. We also note that FMX has a PEG ratio of 0.70. 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. MNST currently has a PEG ratio of 3.21.
Another notable valuation metric for FMX is its P/B ratio of 2.67. 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 10.94.
These are just a few of the metrics contributing to FMX's Value grade of B and MNST's Value grade of F.
FMX 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 FMX is likely 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).