Investors interested in stocks from the Waste Removal Services sector have probably already heard of Veolia Environnement SA (VEOEY) and Waste Management (WM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Veolia Environnement SA and Waste Management are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that VEOEY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
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.
VEOEY currently has a forward P/E ratio of 15.83, while WM has a forward P/E of 27.05. We also note that VEOEY has a PEG ratio of 1.59. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. WM currently has a PEG ratio of 2.31.
Another notable valuation metric for VEOEY is its P/B ratio of 2.17. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WM has a P/B of 8.84.
These metrics, and several others, help VEOEY earn a Value grade of A, while WM has been given a Value grade of C.
VEOEY sticks out from WM 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
Waste Management, Inc. (WM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).