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VEOEY vs. AWK: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Utility - Water Supply sector might want to consider either Veolia Environnement SA (VEOEY - Free Report) or American Water Works (AWK - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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 #1 (Strong 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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

VEOEY currently has a forward P/E ratio of 7.51, while AWK has a forward P/E of 27.14. We also note that VEOEY has a PEG ratio of 0.90. 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 3.32.

Another notable valuation metric for VEOEY is its P/B ratio of 1.38. 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 2.57.

Based on these metrics and many more, VEOEY holds a Value grade of A, while AWK has a 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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American Water Works Company, Inc. (AWK) - free report >>

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