Investors with an interest in Food - Miscellaneous stocks have likely encountered both Landec (LNDC - Free Report) and McCormick (MKC - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Landec and McCormick are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LNDC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
LNDC currently has a forward P/E ratio of 25.69, while MKC has a forward P/E of 32.83. We also note that LNDC has a PEG ratio of 2.57. 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. MKC currently has a PEG ratio of 6.30.
Another notable valuation metric for LNDC is its P/B ratio of 1.18. 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, MKC has a P/B of 6.40.
These are just a few of the metrics contributing to LNDC's Value grade of A and MKC's Value grade of F.
LNDC has seen stronger estimate revision activity and sports more attractive valuation metrics than MKC, so it seems like value investors will conclude that LNDC is the superior option right now.