Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Enbridge (ENB) and Williams Companies, Inc. (The) (WMB). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Enbridge and Williams Companies, Inc. (The) are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ENB has an improving earnings outlook. But this is only part of the picture for value investors.
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 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.
ENB currently has a forward P/E ratio of 13.90, while WMB has a forward P/E of 31.09. We also note that ENB has a PEG ratio of 1.16. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WMB currently has a PEG ratio of 4.15.
Another notable valuation metric for ENB is its P/B ratio of 1.12. 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, WMB has a P/B of 1.30.
These metrics, and several others, help ENB earn a Value grade of B, while WMB has been given a Value grade of C.
ENB has seen stronger estimate revision activity and sports more attractive valuation metrics than WMB, so it seems like value investors will conclude that ENB is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportEnbridge Inc (ENB): Free Stock Analysis ReportWilliams Companies, Inc. (The) (WMB): Free Stock Analysis ReportTo read this article on Zacks.com click here.