UGP or ENB: Which Is the Better Value Stock Right Now?

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 stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Ultrapar Participacoes S.A. has a Zacks Rank of #1 (Strong Buy), while Enbridge 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 UGP 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.

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 10.79, while ENB has a forward P/E of 21.70. We also note that UGP has a PEG ratio of 1.99. 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 4.34.

Another notable valuation metric for UGP is its P/B ratio of 1.32. The 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. By comparison, ENB has a P/B of 2.31.

These are just a few of the metrics contributing to UGP's Value grade of A and ENB's Value grade of C.

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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