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DTEGY vs. SCMWY: Which Stock Should Value Investors Buy Now?

Investors looking for stocks in the Diversified Communication Services sector might want to consider either Deutsche Telekom AG (DTEGY) or 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.

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.

Deutsche Telekom AG and Swisscom AG are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), 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.

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.

DTEGY currently has a forward P/E ratio of 12.55, while SCMWY has a forward P/E of 15.61. We also note that DTEGY has a PEG ratio of 0.72. 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 6.59.

Another notable valuation metric for DTEGY is its P/B ratio of 0.88. 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 22.

These metrics, and several others, help DTEGY earn a Value grade of A, while SCMWY has been given 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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