Investors looking for stocks in the Consumer Products - Staples sector might want to consider either BJ's Wholesale Club (BJ) or Colgate-Palmolive (CL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks 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 means that BJ'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.
BJ currently has a forward P/E ratio of 22.65, while CL has a forward P/E of 24.05. We also note that BJ has a PEG ratio of 3.12. 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. CL currently has a PEG ratio of 4.50.
Another notable valuation metric for BJ is its P/B ratio of 6.11. 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, CL has a P/B of 131.13.
These are just a few of the metrics contributing to BJ's Value grade of B and CL's Value grade of D.
BJ has seen stronger estimate revision activity and sports more attractive valuation metrics than CL, so it seems like value investors will conclude that BJ is the superior 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).