Investors with an interest in Food - Miscellaneous stocks have likely encountered both US Foods Holding Corp. (USFD - Free Report) and Lamb Weston (LW - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
US Foods Holding Corp. has a Zacks Rank of #1 (Strong Buy), while Lamb Weston has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that USFD is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
USFD currently has a forward P/E ratio of 17.73, while LW has a forward P/E of 22.02. We also note that USFD has a PEG ratio of 1.90. 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. LW currently has a PEG ratio of 2.87.
Another notable valuation metric for USFD is its P/B ratio of 2.57. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LW has a P/B of 120.13.
These metrics, and several others, help USFD earn a Value grade of A, while LW has been given a Value grade of D.
USFD sticks out from LW in both our Zacks Rank and Style Scores models, so value investors will likely feel that USFD is the better option right now.