UGP or ENB: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Oil and Gas - Production and Pipelines sector might want to consider either Ultrapar Participacoes S.A. (UGP) or Enbridge (ENB). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Ultrapar Participacoes S.A. has a Zacks Rank of #2 (Buy), while Enbridge has a Zacks Rank of #3 (Hold). This means that UGP'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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
UGP currently has a forward P/E ratio of 10.36, while ENB has a forward P/E of 20.86. We also note that UGP has a PEG ratio of 2.61. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ENB currently has a PEG ratio of 4.17.
Another notable valuation metric for UGP is its P/B ratio of 1.20. 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, ENB has a P/B of 2.14.
Based on these metrics and many more, UGP holds a Value grade of A, while ENB has a Value grade of D.
UGP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UGP is likely the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
