Are Investors Undervaluing Ultrapar Participacoes (UGP) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Ultrapar Participacoes (UGP) is a stock many investors are watching right now. UGP is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 11.56. This compares to its industry's average Forward P/E of 19.57. Over the last 12 months, UGP's Forward P/E has been as high as 12.93 and as low as 6.92, with a median of 10.05.

Another notable valuation metric for UGP is its P/B ratio of 1.34. 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. UGP's current P/B looks attractive when compared to its industry's average P/B of 2.58. Over the past 12 months, UGP's P/B has been as high as 1.61 and as low as 0.97, with a median of 1.19.

Finally, we should also recognize that UGP has a P/CF ratio of 5.03. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. UGP's current P/CF looks attractive when compared to its industry's average P/CF of 12.54. UGP's P/CF has been as high as 5.45 and as low as 3.46, with a median of 4.37, all within the past year.

These are only a few of the key metrics included in Ultrapar Participacoes's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, UGP looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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