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UGP vs. PBA: Which Stock Is the Better Value Option?

Investors interested in Oil and Gas - Production and Pipelines stocks are likely familiar with Ultrapar Participacoes S.A. (UGP) and Pembina Pipeline (PBA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.

Ultrapar Participacoes S.A. has a Zacks Rank of #2 (Buy), while Pembina Pipeline has a Zacks Rank of #3 (Hold) right now. This means that UGP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

UGP currently has a forward P/E ratio of 9.67, while PBA has a forward P/E of 16.91. We also note that UGP has a PEG ratio of 0.42. 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 5.64.

Another notable valuation metric for UGP is its P/B ratio of 1.61. 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, PBA has a P/B of 1.88.

These are just a few of the metrics contributing to UGP's Value grade of A and PBA's Value grade of C.

UGP stands above PBA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UGP is the superior value option right now.

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Pembina Pipeline Corp. (PBA) : Free Stock Analysis Report

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Zacks Investment Research