Investors with an interest in Wireless National stocks have likely encountered both CenturyLink (CTL - Free Report) and United States Cellular (USM - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
CenturyLink has a Zacks Rank of #2 (Buy), while United States Cellular has a Zacks Rank of #4 (Sell) right now. This means that CTL'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 also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
CTL currently has a forward P/E ratio of 9.72, while USM has a forward P/E of 34.10. We also note that CTL has a PEG ratio of 1.82. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. USM currently has a PEG ratio of 34.10.
Another notable valuation metric for CTL is its P/B ratio of 0.66. 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, USM has a P/B of 0.99.
These metrics, and several others, help CTL earn a Value grade of B, while USM has been given a Value grade of C.
CTL sticks out from USM in both our Zacks Rank and Style Scores models, so value investors will likely feel that CTL is the better option right now.