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Are Investors Undervaluing Telefonica (TEF) Right Now?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Telefonica (TEF) is a stock many investors are watching right now. TEF is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 13.97, which compares to its industry's average of 17.30. Over the past 52 weeks, TEF's Forward P/E has been as high as 14.01 and as low as 9.50, with a median of 12.76.

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Another valuation metric that we should highlight is TEF's P/B ratio of 0.90. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.23. Within the past 52 weeks, TEF's P/B has been as high as 0.90 and as low as 0.62, with a median of 0.72.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. TEF has a P/S ratio of 0.61. This compares to its industry's average P/S of 1.3.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Telefonica is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TEF feels like a great value stock at the moment.

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