UGP or PBA: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Oil and Gas - Production and Pipelines sector have probably already heard of Ultrapar Participacoes S.A. (UGP) and Pembina Pipeline (PBA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both Ultrapar Participacoes S.A. and Pembina Pipeline are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture 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.

UGP currently has a forward P/E ratio of 16.83, while PBA has a forward P/E of 16.98. We also note that UGP has a PEG ratio of 0.75. 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. PBA currently has a PEG ratio of 5.66.

Another notable valuation metric for UGP is its P/B ratio of 2.09. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, PBA has a P/B of 2.19.

Based on these metrics and many more, UGP holds a Value grade of A, while PBA has a Value grade of C.

Both UGP and PBA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that UGP is the superior value option right now.

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