Investors with an interest in Utility - Water Supply stocks have likely encountered both Veolia Environnement SA (VEOEY) and American Water Works (AWK). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Veolia Environnement SA has a Zacks Rank of #1 (Strong Buy), while American Water Works has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that VEOEY likely has seen a stronger improvement to its earnings outlook than AWK has recently. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
VEOEY currently has a forward P/E ratio of 7.55, while AWK has a forward P/E of 26.93. We also note that VEOEY has a PEG ratio of 0.79. 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. AWK currently has a PEG ratio of 3.37.
Another notable valuation metric for VEOEY is its P/B ratio of 1.51. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AWK has a P/B of 2.72.
These are just a few of the metrics contributing to VEOEY's Value grade of A and AWK's Value grade of D.
VEOEY sticks out from AWK in both our Zacks Rank and Style Scores models, so value investors will likely feel that VEOEY is the better option right now.
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Today, See These 5 Potential Home Runs >>Veolia Environnement SA (VEOEY) : Free Stock Analysis Report
American Water Works Company, Inc. (AWK) : 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.
