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TEF vs. TU: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Diversified Communication Services sector might want to consider either Telefonica (TEF - Free Report) or Telus (TU - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Telefonica is sporting a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TEF 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 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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

TEF currently has a forward P/E ratio of 14.55, while TU has a forward P/E of 26.39. We also note that TEF has a PEG ratio of 0.92. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TU currently has a PEG ratio of 2.85.

Another notable valuation metric for TEF is its P/B ratio of 0.83. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, TU has a P/B of 2.72.

These are just a few of the metrics contributing to TEF's Value grade of A and TU's Value grade of C.

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


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