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KOF vs. PEP: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Beverages - Soft drinks stocks have likely encountered both Coca-Cola FEMSA (KOF - Free Report) and PepsiCo (PEP - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Currently, Coca-Cola FEMSA has a Zacks Rank of #2 (Buy), while PepsiCo 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 KOF has an improving earnings outlook. But this is only part of the picture 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.

KOF currently has a forward P/E ratio of 14.70, while PEP has a forward P/E of 22.85. We also note that KOF has a PEG ratio of 1.72. 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. PEP currently has a PEG ratio of 3.52.

Another notable valuation metric for KOF is its P/B ratio of 1.66. 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, PEP has a P/B of 14.03.

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

KOF sticks out from PEP in both our Zacks Rank and Style Scores models, so value investors will likely feel that KOF is the better option right now.

In-Depth Zacks Research for the Tickers Above

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Coca Cola Femsa S.A.B. de C.V. (KOF) - free report >>

PepsiCo, Inc. (PEP) - free report >>

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