Investors with an interest in Utility - Water Supply stocks have likely encountered both Veolia Environnement SA (VEOEY) and American Water Works (AWK). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Veolia Environnement SA and American Water Works are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VEOEY has an improving earnings outlook. However, value investors will care about much more than just this.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
VEOEY currently has a forward P/E ratio of 13.92, while AWK has a forward P/E of 25.50. We also note that VEOEY has a PEG ratio of 1.63. 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. AWK currently has a PEG ratio of 3.45.
Another notable valuation metric for VEOEY is its P/B ratio of 1.55. 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, AWK has a P/B of 2.66.
These metrics, and several others, help VEOEY earn a Value grade of A, while AWK has been given a Value grade of D.
VEOEY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that VEOEY is likely the superior value option right now.
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Veolia Environnement SA (VEOEY): Free Stock Analysis Report American Water Works Company, Inc. (AWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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