UGP Or ENB: Which Is The Better Value Stock Right Now?
Zacks Investment Research | Mar 08, 2020 11:40PM ET
Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Ultrapar Participacoes S.A. (UGP) and Enbridge (ENB). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ultrapar Participacoes S.A. has a Zacks Rank of #2 (Buy), while Enbridge 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 UGP has an improving earnings 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.
UGP currently has a forward P/E ratio of 11.53, while ENB has a forward P/E of 19.06. We also note that UGP has a PEG ratio of 1.16. 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. ENB currently has a PEG ratio of 2.12.
Another notable valuation metric for UGP is its P/B ratio of 1.65. 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, ENB has a P/B of 1.66.
Based on these metrics and many more, UGP holds a Value grade of B, while ENB has a Value grade of C.
UGP has seen stronger estimate revision activity and sports more attractive valuation metrics than ENB, so it seems like value investors will conclude that UGP is the superior option right now.
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