TGS vs. WMB: Which Stock Is the Better Value Option?

Investors interested in stocks from the Oil and Gas - Production and Pipelines sector have probably already heard of Transportadora De Gas Sa Ord B (TGS) and Williams Companies, Inc. (The) (WMB). 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.

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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Transportadora De Gas Sa Ord B has a Zacks Rank of #2 (Buy), while Williams Companies, Inc. (The) has a Zacks Rank of #3 (Hold) right now. This means that TGS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

TGS currently has a forward P/E ratio of 16.15, while WMB has a forward P/E of 28.48. We also note that TGS has a PEG ratio of 1.54. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WMB currently has a PEG ratio of 1.62.

Another notable valuation metric for TGS is its P/B ratio of 2.09. 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, WMB has a P/B of 4.96.

These metrics, and several others, help TGS earn a Value grade of B, while WMB has been given a Value grade of D.

TGS has seen stronger estimate revision activity and sports more attractive valuation metrics than WMB, so it seems like value investors will conclude that TGS is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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