Investors interested in Food - Miscellaneous stocks are likely familiar with Kraft Heinz (KHC) and Smucker (SJM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Kraft Heinz has a Zacks Rank of #2 (Buy), while Smucker has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that KHC likely has seen a stronger improvement to its earnings outlook than SJM has recently. But this is just one factor that value investors are interested in.
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.
KHC currently has a forward P/E ratio of 13.26, while SJM has a forward P/E of 15.01. We also note that KHC has a PEG ratio of 2.97. 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. SJM currently has a PEG ratio of 6.20.
Another notable valuation metric for KHC is its P/B ratio of 0.95. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SJM has a P/B of 1.85.
Based on these metrics and many more, KHC holds a Value grade of B, while SJM has a Value grade of C.
KHC 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 KHC is likely the superior value option right now.
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