Back to top

Image: Bigstock

CCU vs. DEO: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors interested in Beverages - Alcohol stocks are likely familiar with Cervecerias Unidas (CCU - Free Report) and 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.

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 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, Cervecerias Unidas is sporting a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CCU likely has seen a stronger improvement to its earnings outlook than DEO has recently. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 21.93, while DEO has a forward P/E of 28.80. We also note that CCU has a PEG ratio of 2.16. 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 3.58.

Another notable valuation metric for CCU is its P/B ratio of 1.94. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DEO has a P/B of 9.45.

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

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


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Diageo plc (DEO) - free report >>

Compania Cervecerias Unidas, S.A. (CCU) - free report >>

Published in