VIV vs. TU: Which Stock Is the Better Value Option?
Investors interested in Diversified Communication Services stocks are likely familiar with Telefonica Brasil (VIV) and Telus (TU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Telefonica Brasil has a Zacks Rank of #2 (Buy), while Telus has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that VIV likely has seen a stronger improvement to its earnings outlook than TU 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 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.
VIV currently has a forward P/E ratio of 16.16, while TU has a forward P/E of 21.56. We also note that VIV has a PEG ratio of 0.96. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. TU currently has a PEG ratio of 2.84.
Another notable valuation metric for VIV is its P/B ratio of 1.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TU has a P/B of 1.76.
These metrics, and several others, help VIV earn a Value grade of A, while TU has been given a Value grade of C.
VIV has seen stronger estimate revision activity and sports more attractive valuation metrics than TU, so it seems like value investors will conclude that VIV is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Telefonica Brasil S.A. (VIV) : Free Stock Analysis Report
TELUS Corporation (TU) : Free Stock Analysis Report
