Investors with an interest in Oil and Gas - Production and Pipelines stocks have likely encountered both 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 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.
Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #1 (Strong Buy), while Enbridge has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that UGP likely has seen a stronger improvement to its earnings outlook than ENB has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
UGP currently has a forward P/E ratio of 10.30, while ENB has a forward P/E of 22.11. We also note that UGP has a PEG ratio of 2.00. 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 4.42.
Another notable valuation metric for UGP is its P/B ratio of 1.43. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ENB has a P/B of 2.34.
These metrics, and several others, help UGP earn a Value grade of A, while ENB has been given a Value grade of C.
UGP sticks out from ENB in both our Zacks Rank and Style Scores models, so value investors will likely feel that UGP is the better option right now.
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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).
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