Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Ultrapar Participacoes S.A. (UGP) and Enbridge (ENB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Enbridge has a Zacks Rank of #3 (Hold). This means that UGP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
UGP currently has a forward P/E ratio of 8.50, while ENB has a forward P/E of 22.14. We also note that UGP has a PEG ratio of 0.40. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ENB currently has a PEG ratio of 5.53.
Another notable valuation metric for UGP is its P/B ratio of 2. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ENB has a P/B of 2.31.
These metrics, and several others, help UGP earn a Value grade of A, while ENB has been given a Value grade of C.
UGP has seen stronger estimate revision activity and sports more attractive valuation metrics than ENB, so it seems like value investors will conclude that UGP is the superior option right now.
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Ultrapar Participacoes S.A. (UGP): Free Stock Analysis Report
Enbridge Inc (ENB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).