Investors with an interest in Diversified Communication Services stocks have likely encountered both PT Telekomunikasi (TLK) and Chunghwa (CHT). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, PT Telekomunikasi is sporting a Zacks Rank of #2 (Buy), while Chunghwa has a Zacks Rank of #3 (Hold). This means that TLK's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
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.
TLK currently has a forward P/E ratio of 14.16, while CHT has a forward P/E of 24.93. We also note that TLK has a PEG ratio of 2.98. 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. CHT currently has a PEG ratio of 5.29.
Another notable valuation metric for TLK is its P/B ratio of 2.32. 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, CHT has a P/B of 2.49.
These metrics, and several others, help TLK earn a Value grade of B, while CHT has been given a Value grade of D.
TLK 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 TLK is likely the superior value option right now.
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PT Telekomunikasi Indonesia, Tbk (TLK): Free Stock Analysis Report Chunghwa Telecom Co., Ltd. (CHT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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