Investors interested in stocks from the Leisure and Recreation Services sector have probably already heard of Carnival (CCL - Free Report) and Manchester United (MANU - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Carnival has a Zacks Rank of #2 (Buy), while Manchester United 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 CCL is likely seeing its earnings outlook improve to a greater extent. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CCL currently has a forward P/E ratio of 11.32, while MANU has a forward P/E of 664. We also note that CCL has a PEG ratio of 1.31. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MANU currently has a PEG ratio of 30.35.
Another notable valuation metric for CCL is its P/B ratio of 1.06. 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, MANU has a P/B of 1.58.
These are just a few of the metrics contributing to CCL's Value grade of A and MANU's Value grade of D.
CCL has seen stronger estimate revision activity and sports more attractive valuation metrics than MANU, so it seems like value investors will conclude that CCL is the superior option right now.