Investors interested in stocks from the Wireless Non-US sector have probably already heard of China Mobile (CHL - Free Report) and NTT Docomo . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
China Mobile has a Zacks Rank of #2 (Buy), while NTT Docomo has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CHL has an improving earnings outlook. But this is just one piece of the puzzle 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CHL currently has a forward P/E ratio of 10.94, while DCMYY has a forward P/E of 15.02. We also note that CHL has a PEG ratio of 2.68. 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. DCMYY currently has a PEG ratio of 3.86.
Another notable valuation metric for CHL is its P/B ratio of 1.16. 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, DCMYY has a P/B of 1.81.
Based on these metrics and many more, CHL holds a Value grade of B, while DCMYY has a Value grade of C.
CHL has seen stronger estimate revision activity and sports more attractive valuation metrics than DCMYY, so it seems like value investors will conclude that CHL is the superior option right now.