UVV or BTI: Which Is the Better Value Stock Right Now?

Investors interested in Tobacco stocks are likely familiar with Universal Corp. (UVV) and British American Tobacco (BTI). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Universal Corp. is sporting a Zacks Rank of #1 (Strong Buy), while British American Tobacco has a Zacks Rank of #3 (Hold). This means that UVV'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 also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

UVV currently has a forward P/E ratio of 11.58, while BTI has a forward P/E of 12.12. We also note that UVV has a PEG ratio of 2.89. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BTI currently has a PEG ratio of 3.82.

Another notable valuation metric for UVV is its P/B ratio of 0.91. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, BTI has a P/B of 1.77.

Based on these metrics and many more, UVV holds a Value grade of B, while BTI has a Value grade of C.

UVV 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 UVV is likely the superior value option right now.

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

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