Investors interested in stocks from the Oil and Gas - Production and Pipelines sector have probably already heard of Ultrapar Participacoes S.A. (UGP) and Enbridge (ENB). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Enbridge has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UGP is likely seeing its earnings outlook improve to a greater extent. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
UGP currently has a forward P/E ratio of 11.44, while ENB has a forward P/E of 22.60. We also note that UGP has a PEG ratio of 2.11. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ENB currently has a PEG ratio of 4.52.
Another notable valuation metric for UGP is its P/B ratio of 1.34. 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, ENB has a P/B of 2.42.
Based on these metrics and many more, UGP holds a Value grade of A, while ENB has a Value grade of C.
UGP stands above ENB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UGP is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ultrapar Participacoes S.A. (UGP): Free Stock Analysis Report Enbridge Inc (ENB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
