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STZ vs. DEO: Which Stock Should Value Investors Buy Now?

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Investors interested in Beverages - Alcohol stocks are likely familiar with Constellation Brands (STZ - Free Report) and Diageo (DEO - 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, Constellation Brands is sporting a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold). This means that STZ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

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.

STZ currently has a forward P/E ratio of 14.43, while DEO has a forward P/E of 18.26. We also note that STZ has a PEG ratio of 1.76. 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. DEO currently has a PEG ratio of 3.06.

Another notable valuation metric for STZ is its P/B ratio of 2.08. 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 6.86.

These are just a few of the metrics contributing to STZ's Value grade of B and DEO's Value grade of D.

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


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