Investors interested in stocks from the Utility - Water Supply sector have probably already heard of Veolia Environnement SA (VEOEY) and American Water Works (AWK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Veolia Environnement SA is sporting a Zacks Rank of #1 (Strong Buy), while American Water Works has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that VEOEY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
VEOEY currently has a forward P/E ratio of 14.26, while AWK has a forward P/E of 24.58. We also note that VEOEY has a PEG ratio of 1.59. 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. AWK currently has a PEG ratio of 3.32.
Another notable valuation metric for VEOEY is its P/B ratio of 1.59. 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, AWK has a P/B of 2.6.
These are just a few of the metrics contributing to VEOEY's Value grade of A and AWK's Value grade of D.
VEOEY sticks out from AWK in both our Zacks Rank and Style Scores models, so value investors will likely feel that VEOEY is the better option right now.
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Veolia Environnement SA (VEOEY): Free Stock Analysis Report American Water Works Company, Inc. (AWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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