Investors with an interest in Mining – Miscellaneous stocks have likely encountered both Billiton (BBL) and Wheaton Precious Metals Corp. (WPM). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Billiton is sporting a Zacks Rank of #2 (Buy), while Wheaton Precious Metals Corp. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BBL is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
BBL currently has a forward P/E ratio of 6.98, while WPM has a forward P/E of 30.25. We also note that BBL has a PEG ratio of 1.68. 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. WPM currently has a PEG ratio of 6.05.
Another notable valuation metric for BBL is its P/B ratio of 1.32. 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, WPM has a P/B of 3.56.
These are just a few of the metrics contributing to BBL’s Value grade of A and WPM’s Value grade of D.
BBL stands above WPM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBL is the superior value option right now.
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