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MARKETS LIVE BLOG:

STOCKS SLIP WITH MIDEAST TENSIONS, EARNINGS IN PLAY

Oil pares losses as traders anticipate Israel's response to Iranian attack

UGP or PBA: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 min read

Investors with an interest in Oil and Gas - Production and Pipelines stocks have likely encountered both Ultrapar Participacoes S.A. (UGP) and Pembina Pipeline (PBA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Pembina Pipeline has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that UGP likely has seen a stronger improvement to its earnings outlook than PBA has recently. But this is just one piece of the puzzle for value investors.

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.

UGP currently has a forward P/E ratio of 13.42, while PBA has a forward P/E of 15.38. We also note that UGP has a PEG ratio of 0.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PBA currently has a PEG ratio of 5.13.

Another notable valuation metric for UGP is its P/B ratio of 1.49. 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, PBA has a P/B of 2.03.

Based on these metrics and many more, UGP holds a Value grade of A, while PBA has a Value grade of C.

UGP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UGP is likely the superior value option right now.


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Ultrapar Participacoes S.A. (UGP) : Free Stock Analysis Report
 
Pembina Pipeline Corp. (PBA) : Free Stock Analysis Report
 
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Zacks Investment Research