Investors with an interest in Food - Miscellaneous stocks have likely encountered both General Mills (GIS - Free Report) and McCormick (MKC - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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.
Both General Mills and McCormick have 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. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
GIS currently has a forward P/E ratio of 15.68, while MKC has a forward P/E of 29.17. We also note that GIS has a PEG ratio of 2.24. 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. MKC currently has a PEG ratio of 3.65.
Another notable valuation metric for GIS is its P/B ratio of 4.31. 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, MKC has a P/B of 6.06.
Based on these metrics and many more, GIS holds a Value grade of B, while MKC has a Value grade of D.
Both GIS and MKC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GIS is the superior value option right now.