Investors interested in Waste Removal Services stocks are likely familiar with Veolia Environnement SA (VEOEY) and Waste Management (WM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Veolia Environnement SA is sporting a Zacks Rank of #2 (Buy), while Waste Management has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VEOEY 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
VEOEY currently has a forward P/E ratio of 13.00, while WM has a forward P/E of 28.95. We also note that VEOEY has a PEG ratio of 1.44. 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. WM currently has a PEG ratio of 3.03.
Another notable valuation metric for VEOEY is its P/B ratio of 1.85. 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, WM has a P/B of 9.41.
These are just a few of the metrics contributing to VEOEY's Value grade of A and WM's Value grade of C.
VEOEY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that VEOEY is likely the superior value option right now.
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Veolia Environnement SA (VEOEY): Free Stock Analysis Report
Waste Management, Inc. (WM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).