Investors looking for stocks in the Beverages - Soft drinks sector might want to consider either Keurig Dr Pepper, Inc (KDP) or Monster Beverage (MNST). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Keurig Dr Pepper, Inc and Monster Beverage are sporting Zacks Ranks of #2 (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 KDP is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
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.
KDP currently has a forward P/E ratio of 12.74, while MNST has a forward P/E of 39.42. We also note that KDP has a PEG ratio of 1.31. 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. MNST currently has a PEG ratio of 2.92.
Another notable valuation metric for KDP is its P/B ratio of 1.36. 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, MNST has a P/B of 9.55.
Based on these metrics and many more, KDP holds a Value grade of B, while MNST has a Value grade of F.
KDP has seen stronger estimate revision activity and sports more attractive valuation metrics than MNST, so it seems like value investors will conclude that KDP is the superior option right now.
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