Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Enbridge (ENB) and Williams Companies, Inc. (The) (WMB). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Enbridge has a Zacks Rank of #2 (Buy), while Williams Companies, Inc. (The) has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ENB likely has seen a stronger improvement to its earnings outlook than WMB has recently. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
ENB currently has a forward P/E ratio of 17.16, while WMB has a forward P/E of 24.04. We also note that ENB has a PEG ratio of 2.55. 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. WMB currently has a PEG ratio of 3.70.
Another notable valuation metric for ENB is its P/B ratio of 1.40. 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, WMB has a P/B of 1.68.
These are just a few of the metrics contributing to ENB's Value grade of B and WMB's Value grade of C.
ENB has seen stronger estimate revision activity and sports more attractive valuation metrics than WMB, so it seems like value investors will conclude that ENB is the superior option right now.
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