Investors with an interest in Utility - Electric Power stocks have likely encountered both AES (AES) and American Electric Power (AEP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, AES is sporting a Zacks Rank of #2 (Buy), while American Electric Power 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 AES is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
AES currently has a forward P/E ratio of 13.58, while AEP has a forward P/E of 20.44. We also note that AES has a PEG ratio of 1.74. 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. AEP currently has a PEG ratio of 3.61.
Another notable valuation metric for AES is its P/B ratio of 2.14. 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, AEP has a P/B of 2.18.
These are just a few of the metrics contributing to AES's Value grade of B and AEP's Value grade of D.
AES sticks out from AEP in both our Zacks Rank and Style Scores models, so value investors will likely feel that AES is the better option right now.
Is your investment advisor fumbling your financial future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.” Click to get your free report.
The AES Corporation (AES) : Free Stock Analysis Report
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
To read this article on Zacks.com click here.