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TEF vs. TU: Which Stock Is the Better Value Option?
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 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.
Telefonica and Telus 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 TEF has an improving earnings outlook. But this is only part of the picture 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.
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.
TEF currently has a forward P/E ratio of 10.52, while TU has a forward P/E of 21.16. We also note that TEF has a PEG ratio of 0.66. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TU currently has a PEG ratio of 2.07.
Another notable valuation metric for TEF is its P/B ratio of 0.66. 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 2.30.
Based on these metrics and many more, TEF holds a Value grade of A, while TU has a Value grade of C.
TEF has seen stronger estimate revision activity and sports more attractive valuation metrics than TU, so it seems like value investors will conclude that TEF is the superior option right now.