Investors interested in Diversified Communication Services stocks are likely familiar with Telefonica (TELFY) and Telus (TU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Telefonica has a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #4 (Sell). This means that TELFY'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 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.
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.
TELFY currently has a forward P/E ratio of 7.88, while TU has a forward P/E of 17.45. We also note that TELFY has a PEG ratio of 0.21. 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. TU currently has a PEG ratio of 4.50.
Another notable valuation metric for TELFY is its P/B ratio of 1.26. 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, TU has a P/B of 1.61.
Based on these metrics and many more, TELFY holds a Value grade of A, while TU has a Value grade of C.
TELFY sticks out from TU in both our Zacks Rank and Style Scores models, so value investors will likely feel that TELFY is the better option right now.
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TELUS Corporation (TU) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
