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KT vs. CHL: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors with an interest in Wireless Non-US stocks have likely encountered both KT Corp. (KT) and China Mobile (CHL). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, KT Corp. has a Zacks Rank of #1 (Strong Buy), while China Mobile has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KT is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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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.

KT currently has a forward P/E ratio of 11.12, while CHL has a forward P/E of 11.48. We also note that KT has a PEG ratio of 1.06. 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. CHL currently has a PEG ratio of 2.81.

Another notable valuation metric for KT is its P/B ratio of 0.55. 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, CHL has a P/B of 1.20.

These metrics, and several others, help KT earn a Value grade of A, while CHL has been given a Value grade of C.

KT has seen stronger estimate revision activity and sports more attractive valuation metrics than CHL, so it seems like value investors will conclude that KT is the superior option right now.


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KT Corporation (KT) : Free Stock Analysis Report
 
China Mobile (Hong Kong) Ltd. (CHL) : Free Stock Analysis Report
 
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