Paris-based utility group Veolia Environnement SA (NYSE:VE) performs what may be considered a dirty job by some. Veolia operates water treatment and energy services for municipalities in key markets including the U.S., China and the U.K. Along with the basic need for clean water in Asian markets, the following basket of ratios will help investors mine for value in Veolia.

Identifying the Need
Parts of Veolia's work maybe dirty, but the need for its services is present and growing. Charitable donor advisory group Give2Asia listed water treatment as the primary need in regions of China hit hardest by earthquakes prior to the summer Olympics. In addition, the need for water treatment in China's growing cities is a palpable, but perhaps under acknowledged, need.

Veolia offers value investors a dream-like combination of low ratios, which also makes the stock look attractive.

Earnings Growth
With a PEG ratio below "1", at 0.83, Veolia is expected to have strong earnings growth over the next five years. Remember, the PEG ratio amounts to the money an investor is willing to pay for each dollar of earnings generated, divided by the expected earnings growth rate. Therefore, a forward P/E ratio of 7.17 suggests that investors are willing to pay $7.17 for each dollar of earnings. The approximate earnings growth rate for the next five years is 8.6%.

Discount to Revenue
Veolia also has a low price-to-sales ratio to compliment its low PEG. Because fuzzy math can be applied more easily to lower levels of financial statements, the P/S, which is related to revenue and tops the income statement, is a good ratio to use. A P/S ratio of "1" means investors pay $1 for each $1 of revenue generated. The P/S formula is the current stock price divided by revenue per share for the trailing twelve months. With a P/S ratio below "1", at 0.22, Veolia investors pay an estimated 22 cents for each $1 of revenue generated, signaling the current discount available to investors. (To learn more about using ratios to value stocks, read Use Price-To-Sales Ratios To Value Stocks.)

Close to Book
The price-to-book ratio measures how a stock's price is trading in relation to the actual breakup value of a company. A tech company like Google (Nasdaq:GOOG) has a P/B ratio of 3.76, which means its $300+ stock price is well above its $87.61 book value. Veolia has a P/B ratio of 1.04, which indicates that the stock is trading just north of its book value. Trading near or below book value can be another sign of value. (For more reading on book value, check out Value by the Book.)

Other foreign water utilities with similar signs of value include Cayman Islands-based Consolidated Water Company (Nasdaq:CWCO) and Brazil-based Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE:SBS).

Final Thoughts
Along with its list value principles, Veolia offers a dividend. Dirty jobs often go unnoticed to end users of the final product, but investors should take notice of these purifiers of perhaps the world's most important commodity.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center