Investors looking for stocks in the Oil and Gas - Production and Pipelines sector might want to consider either Ultrapar Participacoes S.A. (UGP) or Enbridge (ENB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Enbridge has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UGP has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
UGP currently has a forward P/E ratio of 8.95, while ENB has a forward P/E of 20.12. We also note that UGP has a PEG ratio of 2.25. 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 4.02.
Another notable valuation metric for UGP is its P/B ratio of 1.04. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ENB has a P/B of 2.05.
These metrics, and several others, help UGP earn a Value grade of A, while ENB has been given a Value grade of D.
UGP has seen stronger estimate revision activity and sports more attractive valuation metrics than ENB, so it seems like value investors will conclude that UGP is the superior option right now.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpUltrapar Participacoes S.A. (UGP) : Free Stock Analysis Report
Enbridge Inc (ENB) : 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.
