Investors interested in Food - Meat Products stocks are likely familiar with Pilgrim's Pride (PPC - Free Report) and Hormel Foods (HRL - 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.
Pilgrim's Pride and Hormel Foods are sporting Zacks Ranks of #1 (Strong 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 PPC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
PPC currently has a forward P/E ratio of 8.96, while HRL has a forward P/E of 29.21. We also note that PPC has a PEG ratio of 1.34. 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. HRL currently has a PEG ratio of 3.89.
Another notable valuation metric for PPC is its P/B ratio of 1.63. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, HRL has a P/B of 4.22.
These are just a few of the metrics contributing to PPC's Value grade of A and HRL's Value grade of C.
PPC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PPC is likely the superior value option right now.