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ADM or AVO: Which Is the Better Value Stock Right Now?
Investors with an interest in Agriculture - Operations stocks have likely encountered both Archer Daniels Midland (ADM - Free Report) and Mission Produce, Inc. (AVO - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Archer Daniels Midland has a Zacks Rank of #2 (Buy), while Mission Produce, Inc. 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 ADM has an improving earnings outlook. But this is only part of the picture for value investors.
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.
ADM currently has a forward P/E ratio of 12.95, while AVO has a forward P/E of 28.75. We also note that ADM has a PEG ratio of 1.86. 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. AVO currently has a PEG ratio of 2.82.
Another notable valuation metric for ADM is its P/B ratio of 2.01. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AVO has a P/B of 2.07.
These metrics, and several others, help ADM earn a Value grade of A, while AVO has been given a Value grade of C.
ADM has seen stronger estimate revision activity and sports more attractive valuation metrics than AVO, so it seems like value investors will conclude that ADM is the superior option right now.