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CTL vs. USM: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Marsh & McLennan (MMC) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors with an interest in Wireless National stocks have likely encountered both CenturyLink (CTL) and United States Cellular (USM). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

CenturyLink has a Zacks Rank of #2 (Buy), while United States Cellular has a Zacks Rank of #5 (Strong Sell) right now. This means that CTL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

CTL currently has a forward P/E ratio of 9.63, while USM has a forward P/E of 32.18. We also note that CTL has a PEG ratio of 0.76. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. USM currently has a PEG ratio of 32.18.

Another notable valuation metric for CTL is its P/B ratio of 0.65. 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, USM has a P/B of 0.97.

These metrics, and several others, help CTL earn a Value grade of B, while USM has been given a Value grade of D.

CTL has seen stronger estimate revision activity and sports more attractive valuation metrics than USM, so it seems like value investors will conclude that CTL is the superior option right now.

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CenturyLink, Inc. (CTL) : Free Stock Analysis Report
United States Cellular Corporation (USM) : Free Stock Analysis Report
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