Investors interested in Diversified Communication Services stocks are likely familiar with Telecom Italia (TIIAY) and Swisscom AG (SCMWY). But which of these two stocks presents investors with the better value opportunity right now? 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.
Telecom Italia and Swisscom AG are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that TIIAY'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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
TIIAY currently has a forward P/E ratio of 24.23, while SCMWY has a forward P/E of 26.50. We also note that TIIAY has a PEG ratio of 0.45. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SCMWY currently has a PEG ratio of 2.06.
Another notable valuation metric for TIIAY is its P/B ratio of 1.16. 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 30.16.
These are just a few of the metrics contributing to TIIAY's Value grade of B and SCMWY's Value grade of F.
TIIAY stands above SCMWY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TIIAY is the superior value 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
Telecom Italia S.P.A. (TIIAY) : Free Stock Analysis Report
Swisscom AG (SCMWY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
