Investors interested in Utility - Electric Power stocks are likely familiar with AES (AES) and American Electric Power (AEP). 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.
Currently, AES has a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold). This means that AES's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
AES currently has a forward P/E ratio of 13.14, while AEP has a forward P/E of 21.37. We also note that AES has a PEG ratio of 1.55. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AEP currently has a PEG ratio of 3.79.
Another notable valuation metric for AES is its P/B ratio of 2.17. 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, AEP has a P/B of 2.21.
Based on these metrics and many more, AES holds a Value grade of A, while AEP has a Value grade of C.
AES 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 AES is likely the superior value option right now.
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The AES Corporation (AES) : Free Stock Analysis Report
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
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