Investors interested in Diversified Communication Services stocks are likely familiar with Deutsche Telekom AG (DTEGY) and Telus (TU). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Deutsche Telekom AG has a Zacks Rank of #1 (Strong Buy), while Telus has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that DTEGY likely has seen a stronger improvement to its earnings outlook than TU has recently. However, value investors will care about much more than just this.
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 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.
DTEGY currently has a forward P/E ratio of 12.07, while TU has a forward P/E of 24.86. We also note that DTEGY has a PEG ratio of 0.77. 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. TU currently has a PEG ratio of 2.94.
Another notable valuation metric for DTEGY is its P/B ratio of 1.22. 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, TU has a P/B of 2.30.
Based on these metrics and many more, DTEGY holds a Value grade of A, while TU has a Value grade of D.
DTEGY sticks out from TU in both our Zacks Rank and Style Scores models, so value investors will likely feel that DTEGY is the better option right now.
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