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Investors interested in Diversified Communication Services stocks are likely familiar with Telefonica (TEF) and Chunghwa (CHT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Telefonica has a Zacks Rank of #2 (Buy), while Chunghwa has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TEF is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
TEF currently has a forward P/E ratio of 12.20, while CHT has a forward P/E of 28.66. We also note that TEF has a PEG ratio of 0.71. 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. CHT currently has a PEG ratio of 22.74.
Another notable valuation metric for TEF is its P/B ratio of 1.11. 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, CHT has a P/B of 2.72.
These are just a few of the metrics contributing to TEF's Value grade of A and CHT's Value grade of D.
TEF stands above CHT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TEF is the superior value option right now.
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Telefonica SA (TEF) : Free Stock Analysis Report
Chunghwa Telecom Co., Ltd. (CHT) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).