Investors looking for stocks in the Diversified Communication Services sector might want to consider either Deutsche Telekom AG (DTEGY) or Telus (TU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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, Deutsche Telekom AG is sporting a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #3 (Hold). This means that DTEGY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
DTEGY currently has a forward P/E ratio of 11.99, while TU has a forward P/E of 25.24. We also note that DTEGY has a PEG ratio of 0.76. 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 2.86.
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 2.18.
Based on these metrics and many more, DTEGY holds a Value grade of A, while TU has a Value grade of C.
DTEGY has seen stronger estimate revision activity and sports more attractive valuation metrics than TU, so it seems like value investors will conclude that DTEGY is the superior option right now.
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