Investors interested in Utility - Gas Distribution stocks are likely familiar with UGI (UGI - Free Report) and Vectren (VVC - 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, UGI has a Zacks Rank of #1 (Strong Buy), while Vectren 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 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.
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.
UGI currently has a forward P/E ratio of 18.51, while VVC has a forward P/E of 24.92. We also note that UGI has a PEG ratio of 2.31. 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. VVC currently has a PEG ratio of 3.56.
Another notable valuation metric for UGI is its P/B ratio of 2.02. 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, VVC has a P/B of 3.16.
These are just a few of the metrics contributing to UGI's Value grade of A and VVC's Value grade of C.
UGI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UGI is likely the superior value option right now.