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BUD or DEO: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Beverages - Alcohol sector might want to consider either Anheuser-Busch Inbev (BUD - Free Report) or Diageo (DEO - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Anheuser-Busch Inbev has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BUD likely has seen a stronger improvement to its earnings outlook than DEO has recently. 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 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.

BUD currently has a forward P/E ratio of 18.05, while DEO has a forward P/E of 20.67. We also note that BUD has a PEG ratio of 1.86. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DEO currently has a PEG ratio of 2.54.

Another notable valuation metric for BUD is its P/B ratio of 1.41. 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 8.41.

These metrics, and several others, help BUD earn a Value grade of B, while DEO has been given a Value grade of D.

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


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