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

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Investors with an interest in Beverages - Alcohol stocks have likely encountered both Cervecerias Unidas (CCU - Free Report) and Diageo (DEO - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Cervecerias Unidas has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). This means that CCU'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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CCU currently has a forward P/E ratio of 18.78, while DEO has a forward P/E of 29.94. We also note that CCU has a PEG ratio of 1.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DEO currently has a PEG ratio of 3.72.

Another notable valuation metric for CCU is its P/B ratio of 1.69. 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 10.18.

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

CCU stands above DEO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CCU is the superior value option right now.


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