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UGI vs. VVC: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Utility - Gas Distribution sector have probably already heard of UGI (UGI - Free Report) and Vectren . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

UGI and Vectren are sporting Zacks Ranks of #2 (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 UGI has an improving earnings outlook. However, value investors will care about much more than just this.

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 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.

UGI currently has a forward P/E ratio of 19.30, while VVC has a forward P/E of 24.86. We also note that UGI has a PEG ratio of 2.41. 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. VVC currently has a PEG ratio of 3.55.

Another notable valuation metric for UGI is its P/B ratio of 2.09. 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, VVC has a P/B of 3.18.

These metrics, and several others, help UGI earn a Value grade of A, while VVC has been given a Value grade of C.

UGI sticks out from VVC in both our Zacks Rank and Style Scores models, so value investors will likely feel that UGI is the better option right now.


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