Investors interested in Consumer Products - Staples stocks are likely familiar with Ahold NV (ADRNY) and Kimberly-Clark (KMB). 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.
Ahold NV and Kimberly-Clark are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
ADRNY currently has a forward P/E ratio of 12.60, while KMB has a forward P/E of 19.65. We also note that ADRNY has a PEG ratio of 2.04. 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. KMB currently has a PEG ratio of 3.02.
Another notable valuation metric for ADRNY is its P/B ratio of 1.99. 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, KMB has a P/B of 37.44.
These metrics, and several others, help ADRNY earn a Value grade of A, while KMB has been given a Value grade of C.
Both ADRNY and KMB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ADRNY is the superior value option right now.
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