Investors with an interest in Oil and Gas - Production and Pipelines stocks have likely encountered both Enbridge (ENB) and Williams Companies, Inc. The (WMB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Enbridge is sporting a Zacks Rank of #2 (Buy), while Williams Companies, Inc. The has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ENB has an improving earnings outlook. But this is only part of the picture for value investors.
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 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.
ENB currently has a forward P/E ratio of 16.08, while WMB has a forward P/E of 36.93. We also note that ENB has a PEG ratio of 1.67. 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. WMB currently has a PEG ratio of 7.39.
Another notable valuation metric for ENB is its P/B ratio of 1.29. 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, WMB has a P/B of 1.52.
These are just a few of the metrics contributing to ENB's Value grade of B and WMB's Value grade of C.
ENB stands above WMB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ENB is the superior value option right now.
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