Investors interested in Consumer Products - Staples stocks are likely familiar with BJ's Wholesale Club (BJ) and Colgate-Palmolive (CL). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, BJ's Wholesale Club is sporting a Zacks Rank of #2 (Buy), while Colgate-Palmolive has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BJ is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
BJ currently has a forward P/E ratio of 20.79, while CL has a forward P/E of 23.94. We also note that BJ has a PEG ratio of 3.50. 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. CL currently has a PEG ratio of 4.51.
Another notable valuation metric for BJ is its P/B ratio of 5.64. 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, CL has a P/B of 130.01.
These are just a few of the metrics contributing to BJ's Value grade of B and CL's Value grade of D.
BJ stands above CL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BJ is the superior value option right now.
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BJ's Wholesale Club Holdings, Inc. (BJ): Free Stock Analysis Report
Colgate-Palmolive Company (CL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).