Investors with an interest in Diversified Communication Services stocks have likely encountered both Telefonica Brasil (VIV) and Telus (TU). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Telefonica Brasil is sporting a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that VIV likely has seen a stronger improvement to its earnings outlook than TU has recently. 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.
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 16.04, while TU has a forward P/E of 22.25. We also note that VIV has a PEG ratio of 0.96. 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 2.54.
Another notable valuation metric for VIV is its P/B ratio of 1.06. 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 1.83.
These metrics, and several others, help VIV earn a Value grade of A, while TU has been given a Value grade of C.
VIV stands above TU thanks to its solid earnings outlook, and based on these valuation figures, we also feel that VIV is the superior value option right now.
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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.
