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

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Investors interested in stocks from the Food - Miscellaneous sector have probably already heard of Kellogg (K - Free Report) and Lamb Weston (LW - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Kellogg has a Zacks Rank of #2 (Buy), while Lamb Weston has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that K likely has seen a stronger improvement to its earnings outlook than LW has recently. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

K currently has a forward P/E ratio of 16.15, while LW has a forward P/E of 21.43. We also note that K has a PEG ratio of 4.22. 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. LW currently has a PEG ratio of 6.30.

Another notable valuation metric for K is its P/B ratio of 6.55. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LW has a P/B of 30.15.

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

K has seen stronger estimate revision activity and sports more attractive valuation metrics than LW, so it seems like value investors will conclude that K is the superior option right now.


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