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CCU vs. DEO: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Beverages - Alcohol sector might want to consider either Cervecerias Unidas (CCU - Free Report) or Diageo (DEO - 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.

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.

Cervecerias Unidas and Diageo are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

CCU currently has a forward P/E ratio of 23.35, while DEO has a forward P/E of 27.24. We also note that CCU has a PEG ratio of 2.30. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DEO currently has a PEG ratio of 3.27.

Another notable valuation metric for CCU is its P/B ratio of 1.88. 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, DEO has a P/B of 8.86.

Based on these metrics and many more, CCU holds a Value grade of B, while DEO has a Value grade of D.

Both CCU and DEO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CCU is the superior value option right now.


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