UGP vs. ENB: Which Stock Is the Better Value Option?

Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Ultrapar Participacoes S.A. (UGP) and Enbridge (ENB). 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.

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.

Ultrapar Participacoes S.A. and Enbridge are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that UGP likely has seen a stronger improvement to its earnings outlook than ENB has recently. 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

UGP currently has a forward P/E ratio of 10.79, while ENB has a forward P/E of 22.63. We also note that UGP 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. ENB currently has a PEG ratio of 4.53.

Another notable valuation metric for UGP is its P/B ratio of 1.32. 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 D.

UGP 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 UGP is likely the superior value option right now.

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

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