TEF vs. TU: Which Stock Is the Better Value Option?
Investors interested in stocks from the Diversified Communication Services sector have probably already heard of Telefonica (TEF) and Telus (TU). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Telefonica has a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #3 (Hold) right now. This means that TEF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
TEF currently has a forward P/E ratio of 11.66, while TU has a forward P/E of 24.85. We also note that TEF has a PEG ratio of 0.58. 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. TU currently has a PEG ratio of 2.81.
Another notable valuation metric for TEF is its P/B ratio of 0.73. 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, TU has a P/B of 2.14.
These are just a few of the metrics contributing to TEF's Value grade of A and TU's Value grade of C.
TEF 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 TEF is likely the superior value option right now.
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Telefonica SA (TEF) : Free Stock Analysis Report
TELUS Corporation (TU) : Free Stock Analysis Report
