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 is more attractive to value investors? We'll need to take a closer look to find out.
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). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FMX has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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 23.02, while MNST has a forward P/E of 38.08. We also note that FMX has a PEG ratio of 0.77. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. MNST currently has a PEG ratio of 2.90.
Another notable valuation metric for FMX is its P/B ratio of 2.46. 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 9.87.
Based on these metrics and many more, FMX holds a Value grade of B, while MNST has a 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).