Investors looking for stocks in the Consumer Products - Staples sector might want to consider either Newell Brands (NWL) or Kenvue (KVUE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Newell Brands and Kenvue are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This means that NWL'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 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.
NWL currently has a forward P/E ratio of 7.21, while KVUE has a forward P/E of 15.22. We also note that NWL has a PEG ratio of 1.35. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. KVUE currently has a PEG ratio of 1.59.
Another notable valuation metric for NWL is its P/B ratio of 0.95. 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, KVUE has a P/B of 3.16.
Based on these metrics and many more, NWL holds a Value grade of A, while KVUE has a Value grade of C.
NWL 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 NWL is likely the superior value option right now.
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Newell Brands Inc. (NWL): Free Stock Analysis Report
Kenvue Inc. (KVUE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).