Should Value Investors Buy Telefonica (TEF) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Telefonica (TEF). TEF is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock has a Forward P/E ratio of 16.71. This compares to its industry's average Forward P/E of 22.50. TEF's Forward P/E has been as high as 18.53 and as low as 8.36, with a median of 13.63, all within the past year.
Another valuation metric that we should highlight is TEF's P/B ratio of 0.76. 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. This stock's P/B looks solid versus its industry's average P/B of 2.26. Over the past year, TEF's P/B has been as high as 0.88 and as low as 0.55, with a median of 0.70.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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 0.58. This compares to its industry's average P/S of 1.6.
Finally, investors will want to recognize that TEF has a P/CF ratio of 14.54. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 20.15. TEF's P/CF has been as high as 95.90 and as low as 2.89, with a median of 15.02, all within the past year.
Another great Diversified Communication Services stock you could consider is Telefonica Brasil (VIV), which is a # 2 (Buy) stock with a Value Score of A.
Shares of Telefonica Brasil currently holds a Forward P/E ratio of 13.67, and its PEG ratio is 3. In comparison, its industry sports average P/E and PEG ratios of 22.50 and 3.49.
VIV's Forward P/E has been as high as 19.10 and as low as 12.56, with a median of 15.38. During the same time period, its PEG ratio has been as high as 3.44, as low as 0.93, with a median of 1.88.
Telefonica Brasil also has a P/B ratio of 1.05 compared to its industry's price-to-book ratio of 2.26. Over the past year, its P/B ratio has been as high as 1.36, as low as 0.81, with a median of 0.98.
These are only a few of the key metrics included in Telefonica and Telefonica Brasil strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, TEF and VIV look like an impressive value stock at the moment.
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Telefonica SA (TEF) : Free Stock Analysis Report
Telefonica Brasil S.A. (VIV) : Free Stock Analysis Report
