Which stock offers the better value option?

Investors interested in beverage and alcohol stocks are probably familiar with Heineken NV (HEINY) and The Duckhorn Portfolio, Inc. (NAPA). But which of these two stocks is more attractive to value investors? To find out, we need to take a closer look at the two.

There are many strategies for discovering value stocks, but we have found that combining a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, both Heineken NV and The Duckhorn Portfolio, Inc. have a Zacks Rank of #2 (Buy). This system places emphasis on companies that have seen positive earnings revisions, so investors can be confident that these stocks have better earnings prospects. However, value investors will be interested in much more than just this.

Value investors are also interested in a number of proven valuation metrics that show when a company is undervalued at its current share price.

The Value category of the Style Scores system identifies undervalued companies using a number of key metrics, including the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other fundamentals that help us determine a company’s fair value.

HEINY currently has a forward P/E ratio of 19.28, while NAPA has a forward P/E ratio of 31.59. We also note that HEINY has a PEG ratio of 1.35. 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. NAPA currently has a PEG ratio of 2.58.

Another important valuation metric for HEINY is its P/B ratio of 2.34. 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. For comparison, NAPA has a P/B ratio of 2.63.

These and some other metrics help HEINY to get a B rating, while NAPA gets a D rating.

Both HEINY and NAPA are impressive stocks with solid earnings prospects, but based on these valuation numbers, we believe HEINY is the better value option right now.

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