Back to top

Image: Bigstock

LUMN or TMUS: Which Is the Better Value Stock Right Now?

Read MoreHide Full Article

Investors interested in Wireless National stocks are likely familiar with CenturyLink (LUMN - Free Report) and T-Mobile (TMUS - Free Report) . 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, CenturyLink is sporting a Zacks Rank of #2 (Buy), while T-Mobile has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LUMN 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.

LUMN currently has a forward P/E ratio of 7.03, while TMUS has a forward P/E of 60.04. We also note that LUMN has a PEG ratio of 4.69. 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. TMUS currently has a PEG ratio of 4.87.

Another notable valuation metric for LUMN is its P/B ratio of 0.82. 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, TMUS has a P/B of 2.54.

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

LUMN has seen stronger estimate revision activity and sports more attractive valuation metrics than TMUS, so it seems like value investors will conclude that LUMN is the superior option right now.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Lumen Technologies, Inc. (LUMN) - free report >>

TMobile US, Inc. (TMUS) - free report >>

Published in