Investors interested in stocks from the Diversified Communication Services sector have probably already heard of Deutsche Telekom AG (DTEGY) and Swisscom AG (SCMWY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Deutsche Telekom AG and Swisscom AG are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that DTEGY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 13.02, while SCMWY has a forward P/E of 24.90. We also note that DTEGY has a PEG ratio of 0.76. 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 2.20.
Another notable valuation metric for DTEGY is its P/B ratio of 1.54. 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, SCMWY has a P/B of 28.81.
Based on these metrics and many more, DTEGY holds a Value grade of A, while SCMWY has a 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).
