Investors interested in Diversified Communication Services stocks are likely familiar with Deutsche Telekom AG (DTEGY) and Swisscom AG (SCMWY). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Deutsche Telekom AG and Swisscom AG are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DTEGY has an improving earnings outlook. 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.
DTEGY currently has a forward P/E ratio of 11.45, while SCMWY has a forward P/E of 24.38. We also note that DTEGY has a PEG ratio of 0.67. 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. SCMWY currently has a PEG ratio of 1.90.
Another notable valuation metric for DTEGY is its P/B ratio of 1.53. 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, SCMWY has a P/B of 28.3.
These are just a few of the metrics contributing to DTEGY's Value grade of A and SCMWY's Value grade of F.
DTEGY has seen stronger estimate revision activity and sports more attractive valuation metrics than SCMWY, so it seems like value investors will conclude that DTEGY is the superior option right now.
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Deutsche Telekom AG (DTEGY) : Free Stock Analysis Report
Swisscom AG (SCMWY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
