Investors interested in Utility - Water Supply stocks are likely familiar with Veolia Environnement SA (VEOEY - Free Report) and Global Water Resources, Inc. (GWRS - 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.
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.
Right now, Veolia Environnement SA is sporting a Zacks Rank of #2 (Buy), while Global Water Resources, Inc. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that VEOEY is likely seeing its earnings outlook improve to a greater extent. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
VEOEY currently has a forward P/E ratio of 16.88, while GWRS has a forward P/E of 83.13. We also note that VEOEY has a PEG ratio of 1.74. 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. GWRS currently has a PEG ratio of 5.54.
Another notable valuation metric for VEOEY is its P/B ratio of 1.94. 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, GWRS has a P/B of 10.87.
These metrics, and several others, help VEOEY earn a Value grade of A, while GWRS has been given a Value grade of D.
VEOEY has seen stronger estimate revision activity and sports more attractive valuation metrics than GWRS, so it seems like value investors will conclude that VEOEY is the superior option right now.