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TU vs. TLSYY: Which Stock Should Value Investors Buy Now?
Investors with an interest in Diversified Communication Services stocks have likely encountered both Telus (TU - Free Report) and Telstra Corp. . But which of these two stocks presents investors with the better value opportunity right now? 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 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.
Telus has a Zacks Rank of #2 (Buy), while Telstra Corp. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TU likely has seen a stronger improvement to its earnings outlook than TLSYY has recently. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
TU currently has a forward P/E ratio of 23.15, while TLSYY has a forward P/E of 24.21. We also note that TU has a PEG ratio of 2.38. 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. TLSYY currently has a PEG ratio of 2.87.
Another notable valuation metric for TU is its P/B ratio of 2.45. 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, TLSYY has a P/B of 2.60.
Based on these metrics and many more, TU holds a Value grade of B, while TLSYY has a Value grade of C.
TU has seen stronger estimate revision activity and sports more attractive valuation metrics than TLSYY, so it seems like value investors will conclude that TU is the superior option right now.