Investors interested in Diversified Communication Services stocks are likely familiar with Telefonica (TELFY) and Chunghwa (CHT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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.
Telefonica has a Zacks Rank of #2 (Buy), while Chunghwa has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TELFY is likely seeing its earnings outlook improve to a greater extent. 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.
TELFY currently has a forward P/E ratio of 7.51, while CHT has a forward P/E of 29.58. We also note that TELFY has a PEG ratio of 0.19. 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 2.05.
Another notable valuation metric for TELFY is its P/B ratio of 1.03. 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 2.96.
Based on these metrics and many more, TELFY holds a Value grade of A, while CHT has a Value grade of D.
TELFY has seen stronger estimate revision activity and sports more attractive valuation metrics than CHT, so it seems like value investors will conclude that TELFY is the superior option right now.
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Telefonica SA (TELFY): Free Stock Analysis Report
Chunghwa Telecom Co., Ltd. (CHT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).