Investors with an interest in Beverages - Soft drinks stocks have likely encountered both Coca-Cola (NYSE:KO) FEMSA (KOF) and Fomento Economico (FMX). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Coca-Cola FEMSA has a Zacks Rank of #2 (Buy), while Fomento Economico has a Zacks Rank of #4 (Sell). This means that KOF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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 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.
KOF currently has a forward P/E ratio of 17.50, while FMX has a forward P/E of 27.49. We also note that KOF has a PEG ratio of 1.91. 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. FMX currently has a PEG ratio of 2.05.
Another notable valuation metric for KOF is its P/B ratio of 1.94. 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, FMX has a P/B of 1.95.
Based on these metrics and many more, KOF holds a Value grade of A, while FMX has a Value grade of C.
KOF sticks out from FMX in both our Zacks Rank and Style Scores models, so value investors will likely feel that KOF is the better option right now.
Coca Cola Femsa S.A.B. de C.V. (KOF): Free Stock Analysis Report
Fomento Economico Mexicano S.A.B. de C.V. (FMX): Free Stock Analysis Report
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