VIV vs. CHT: Which Stock Is the Better Value Option?

Investors interested in stocks from the Diversified Communication Services sector have probably already heard of Telefonica Brasil (VIV) and Chunghwa (CHT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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.

Telefonica Brasil has a Zacks Rank of #1 (Strong Buy), while Chunghwa has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that VIV likely has seen a stronger improvement to its earnings outlook than CHT has recently. 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.

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.

VIV currently has a forward P/E ratio of 17.30, while CHT has a forward P/E of 25.65. We also note that VIV has a PEG ratio of 0.69. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CHT currently has a PEG ratio of 5.45.

Another notable valuation metric for VIV is its P/B ratio of 2.05. 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, CHT has a P/B of 2.6.

These metrics, and several others, help VIV earn a Value grade of B, while CHT has been given a Value grade of D.

VIV sticks out from CHT in both our Zacks Rank and Style Scores models, so value investors will likely feel that VIV is the better option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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