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

Heineken NV has a Zacks Rank of #2 (Buy), while Diageo has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HEINY has an improving earnings outlook. 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.

HEINY currently has a forward P/E ratio of 15.55, while DEO has a forward P/E of 17.02. We also note that HEINY has a PEG ratio of 1.99. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DEO currently has a PEG ratio of 2.43.

Another notable valuation metric for HEINY is its P/B ratio of 1.99. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DEO has a P/B of 4.91.

These metrics, and several others, help HEINY earn a Value grade of B, while DEO has been given a Value grade of C.

HEINY has seen stronger estimate revision activity and sports more attractive valuation metrics than DEO, so it seems like value investors will conclude that HEINY is the superior option right now.

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Heineken NV (HEINY) : Free Stock Analysis Report

Diageo plc (DEO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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