Back to top

Image: Bigstock

ARMK vs. K: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors looking for stocks in the Food - Miscellaneous sector might want to consider either Aramark (ARMK - Free Report) or Kellogg (K - 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.

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.

Right now, Aramark is sporting a Zacks Rank of #2 (Buy), while Kellogg has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ARMK is likely seeing its earnings outlook improve to a greater extent. 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.

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.

ARMK currently has a forward P/E ratio of 11.26, while K has a forward P/E of 16.19. We also note that ARMK has a PEG ratio of 1.39. 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. K currently has a PEG ratio of 3.68.

Another notable valuation metric for ARMK is its P/B ratio of 1.90. 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, K has a P/B of 6.37.

These metrics, and several others, help ARMK earn a Value grade of B, while K has been given a Value grade of C.

ARMK stands above K thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ARMK is the superior value option right now.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Aramark (ARMK) - free report >>

Kellogg Company (K) - free report >>

Published in