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ABEV vs. DEO: Which Stock Is the Better Value Option?

Zacks Equity Research
·2-min read

Investors interested in stocks from the Beverages - Alcohol sector have probably already heard of Ambev (ABEV) and Diageo (DEO). 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.

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.

Both Ambev and Diageo have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

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.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

ABEV currently has a forward P/E ratio of 19.45, while DEO has a forward P/E of 28.20. We also note that ABEV has a PEG ratio of 2.47. 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. DEO currently has a PEG ratio of 3.10.

Another notable valuation metric for ABEV is its P/B ratio of 2.63. 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, DEO has a P/B of 10.76.

Based on these metrics and many more, ABEV holds a Value grade of B, while DEO has a Value grade of D.

Both ABEV and DEO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ABEV is the superior value option right now.


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Ambev S.A. (ABEV) : Free Stock Analysis Report
 
Diageo plc (DEO) : Free Stock Analysis Report
 
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