CCU vs. ABEV: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Cervecerias Unidas (CCU) and Ambev (ABEV). 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.

Cervecerias Unidas has a Zacks Rank of #2 (Buy), while Ambev has a Zacks Rank of #4 (Sell) right now. This means that CCU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

CCU currently has a forward P/E ratio of 14.90, while ABEV has a forward P/E of 15.15. We also note that CCU has a PEG ratio of 0.77. 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. ABEV currently has a PEG ratio of 1.80.

Another notable valuation metric for CCU is its P/B ratio of 1.09. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ABEV has a P/B of 2.81.

These are just a few of the metrics contributing to CCU's Value grade of A and ABEV's Value grade of C.

CCU stands above ABEV thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CCU is the superior value option right now.

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

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