Investors with an interest in Diversified Communication Services stocks have likely encountered both Telefonica Brasil (VIV) and BCE (BCE). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Telefonica Brasil and BCE are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VIV has an improving earnings outlook. But this is just one piece of the puzzle 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
VIV currently has a forward P/E ratio of 8.01, while BCE has a forward P/E of 14.89. We also note that VIV has a PEG ratio of 0.77. 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. BCE currently has a PEG ratio of 4.25.
Another notable valuation metric for VIV is its P/B ratio of 1.08. 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, BCE has a P/B of 2.69.
These metrics, and several others, help VIV earn a Value grade of B, while BCE has been given a Value grade of C.
VIV has seen stronger estimate revision activity and sports more attractive valuation metrics than BCE, so it seems like value investors will conclude that VIV is the superior option right now.
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