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ARMK or K: Which Is the Better Value Stock Right Now?

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Investors with an interest in Food - Miscellaneous stocks have likely encountered both Aramark (ARMK - Free Report) and Kellogg (K - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Aramark and Kellogg are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that ARMK'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 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.

ARMK currently has a forward P/E ratio of 13.56, while K has a forward P/E of 14.06. We also note that ARMK has a PEG ratio of 1.48. 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. K currently has a PEG ratio of 3.12.

Another notable valuation metric for ARMK is its P/B ratio of 2.42. 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, K has a P/B of 6.

These metrics, and several others, help ARMK earn a Value grade of A, while K has been given a Value grade of C.

ARMK has seen stronger estimate revision activity and sports more attractive valuation metrics than K, so it seems like value investors will conclude that ARMK is the superior option right now.


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