Investors looking for stocks in the Diversified Communication Services sector might want to consider either PT Telekomunikasi (TLK) or 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, PT Telekomunikasi is sporting a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that TLK likely has seen a stronger improvement to its earnings outlook than TU has recently. But this is just one piece of the puzzle for value investors.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
TLK currently has a forward P/E ratio of 11.24, while TU has a forward P/E of 21.01. We also note that TLK has a PEG ratio of 1.45. 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. TU currently has a PEG ratio of 2.37.
Another notable valuation metric for TLK is its P/B ratio of 1.77. 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, TU has a P/B of 1.82.
These metrics, and several others, help TLK earn a Value grade of B, while TU has been given a Value grade of C.
TLK 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 TLK is likely the superior value option right now.
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TELUS Corporation (TU) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
