Investors with an interest in Diversified Communication Services stocks have likely encountered both Telecom Italia (TIIAY) and Chunghwa (CHT). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Telecom Italia has a Zacks Rank of #2 (Buy), while Chunghwa has a Zacks Rank of #5 (Strong Sell) right now. This means that TIIAY'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 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.
TIIAY currently has a forward P/E ratio of 27.86, while CHT has a forward P/E of 28.35. We also note that TIIAY has a PEG ratio of 0.52. 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. CHT currently has a PEG ratio of 1.96.
Another notable valuation metric for TIIAY is its P/B ratio of 1.34. 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, CHT has a P/B of 2.66.
These are just a few of the metrics contributing to TIIAY's Value grade of B and CHT's Value grade of F.
TIIAY 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 TIIAY is likely the superior value option right now.
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Telecom Italia S.P.A. (TIIAY): Free Stock Analysis Report
Chunghwa Telecom Co., Ltd. (CHT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).