Investors interested in Utility - Water Supply stocks are likely familiar with Sabesp (SBS) and American States Water (AWR). 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 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.
Sabesp and American States Water are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
SBS currently has a forward P/E ratio of 4.52, while AWR has a forward P/E of 20.90. We also note that SBS has a PEG ratio of 1.32. 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. AWR currently has a PEG ratio of 3.02.
Another notable valuation metric for SBS is its P/B ratio of 2.48. 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, AWR has a P/B of 2.86.
These metrics, and several others, help SBS earn a Value grade of B, while AWR has been given a Value grade of D.
Both SBS and AWR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SBS is the superior value option right now.
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Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp (SBS): Free Stock Analysis Report
American States Water Company (AWR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).