Investors with an interest in Tobacco stocks have likely encountered both Universal Corp. (UVV) and British American Tobacco (BTI). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Universal Corp. is sporting a Zacks Rank of #2 (Buy), while British American Tobacco 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 UVV is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
UVV currently has a forward P/E ratio of 11.21, while BTI has a forward P/E of 13.14. We also note that UVV has a PEG ratio of 2.80. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. BTI currently has a PEG ratio of 4.16.
Another notable valuation metric for UVV is its P/B ratio of 0.88. 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, BTI has a P/B of 1.92.
Based on these metrics and many more, UVV holds a Value grade of B, while BTI has a Value grade of C.
UVV 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 UVV is likely the superior value option right now.
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Universal Corporation (UVV): Free Stock Analysis Report British American Tobacco p.l.c. (BTI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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