Investors with an interest in Utility - Gas Distribution stocks have likely encountered both UGI (UGI - Free Report) and Vectren (VVC - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
UGI and Vectren are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that UGI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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 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.
UGI currently has a forward P/E ratio of 19.58, while VVC has a forward P/E of 24.87. We also note that UGI has a PEG ratio of 2.45. 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. VVC currently has a PEG ratio of 3.55.
Another notable valuation metric for UGI is its P/B ratio of 2.22. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, VVC has a P/B of 3.18.
These are just a few of the metrics contributing to UGI's Value grade of B and VVC's Value grade of C.
UGI has seen stronger estimate revision activity and sports more attractive valuation metrics than VVC, so it seems like value investors will conclude that UGI is the superior option right now.