Investors interested in stocks from the Food - Meat Products sector have probably already heard of Tyson Foods (TSN) and Hormel Foods (HRL). 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 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.
Tyson Foods has a Zacks Rank of #2 (Buy), while Hormel Foods has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TSN is likely seeing its earnings outlook improve to a greater extent. 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.
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.
TSN currently has a forward P/E ratio of 11.82, while HRL has a forward P/E of 26.67. We also note that TSN has a PEG ratio of 1.03. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HRL currently has a PEG ratio of 4.40.
Another notable valuation metric for TSN is its P/B ratio of 2. 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, HRL has a P/B of 4.23.
These are just a few of the metrics contributing to TSN's Value grade of A and HRL's Value grade of C.
TSN sticks out from HRL in both our Zacks Rank and Style Scores models, so value investors will likely feel that TSN is the better option right now.
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Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
Hormel Foods Corporation (HRL) : Free Stock Analysis Report
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