Investors interested in stocks from the Diversified Communication Services sector have probably already heard of Telefonica Brasil (VIV) and Swisscom AG (SCMWY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Telefonica Brasil has a Zacks Rank of #2 (Buy), while Swisscom AG has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VIV has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
VIV currently has a forward P/E ratio of 13.31, while SCMWY has a forward P/E of 25.81. We also note that VIV has a PEG ratio of 0.71. 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. SCMWY currently has a PEG ratio of 2.00.
Another notable valuation metric for VIV is its P/B ratio of 1.58. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SCMWY has a P/B of 28.91.
These are just a few of the metrics contributing to VIV's Value grade of A and SCMWY's Value grade of F.
VIV sticks out from SCMWY in both our Zacks Rank and Style Scores models, so value investors will likely feel that VIV is the better option right now.
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Telefonica Brasil S.A. (VIV): Free Stock Analysis Report
Swisscom AG (SCMWY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).