Investors with an interest in Oil and Gas - Production and Pipelines stocks have likely encountered both Ultrapar Participacoes S.A. (UGP) and Kinder Morgan (KMI). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Kinder Morgan has a Zacks Rank of #3 (Hold). This means that UGP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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 12.74, while KMI has a forward P/E of 21.84. We also note that UGP has a PEG ratio of 1.89. 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. KMI currently has a PEG ratio of 2.44.
Another notable valuation metric for UGP is its P/B ratio of 1.58. 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, KMI has a P/B of 2.03.
These metrics, and several others, help UGP earn a Value grade of A, while KMI has been given a Value grade of D.
UGP has seen stronger estimate revision activity and sports more attractive valuation metrics than KMI, so it seems like value investors will conclude that UGP is the superior option right now.
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Ultrapar Participacoes S.A. (UGP): Free Stock Analysis Report Kinder Morgan, Inc. (KMI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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