Investors looking for stocks in the Oil and Gas - Production and Pipelines sector might want to consider either Ultrapar Participacoes S.A. (UGP) or Enbridge (ENB). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Ultrapar Participacoes S.A. is sporting a Zacks Rank of #2 (Buy), while Enbridge has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UGP has an improving earnings outlook. But this is only part of the picture 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 8.95, while ENB has a forward P/E of 20.12. We also note that UGP has a PEG ratio of 2.25. 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. ENB currently has a PEG ratio of 4.02.

Another notable valuation metric for UGP is its P/B ratio of 1.04. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ENB has a P/B of 2.05.

These metrics, and several others, help UGP earn a Value grade of A, while ENB has been given a Value grade of D.

UGP has seen stronger estimate revision activity and sports more attractive valuation metrics than ENB, so it seems like value investors will conclude that UGP is the superior option right now.

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Ultrapar Participacoes S.A. (UGP) : Free Stock Analysis Report

Enbridge Inc (ENB) : Free Stock Analysis Report

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

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