UGP or ENB: Which Is the Better Value Stock Right Now?

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 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Ultrapar Participacoes S.A. has a Zacks Rank of #1 (Strong Buy), while Enbridge has a Zacks Rank of #4 (Sell). This means that UGP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

UGP currently has a forward P/E ratio of 6.86, while ENB has a forward P/E of 23.66. We also note that UGP has a PEG ratio of 0.32. 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 5.91.

Another notable valuation metric for UGP is its P/B ratio of 1.68. 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 2.43.

Based on these metrics and many more, UGP holds a Value grade of A, while ENB has a Value grade of D.

UGP sticks out from ENB in both our Zacks Rank and Style Scores models, so value investors will likely feel that UGP is the better option right now.

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

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