Investors interested in Utility - Water Supply stocks are likely familiar with Veolia Environnement SA (VEOEY) and American Water Works (AWK). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Veolia Environnement SA has a Zacks Rank of #2 (Buy), while American Water Works has a Zacks Rank of #3 (Hold). This means that VEOEY'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 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.
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.
VEOEY currently has a forward P/E ratio of 16.09, while AWK has a forward P/E of 29.75. We also note that VEOEY has a PEG ratio of 1.38. 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. AWK currently has a PEG ratio of 3.68.
Another notable valuation metric for VEOEY is its P/B ratio of 1.22. 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, AWK has a P/B of 3.35.
These are just a few of the metrics contributing to VEOEY's Value grade of A and AWK's Value grade of D.
VEOEY 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 VEOEY is likely the superior value option right now.
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