Investors looking for stocks in the Utility - Electric Power sector might want to consider either AES (AES) or Southern Co. (SO). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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 Southern Co. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that AES likely has seen a stronger improvement to its earnings outlook than SO has recently. 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 9.35, while SO has a forward P/E of 18.15. We also note that AES has a PEG ratio of 1.21. 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. SO currently has a PEG ratio of 4.54.
Another notable valuation metric for AES is its P/B ratio of 1.68. 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, SO has a P/B of 1.87.
Based on these metrics and many more, AES holds a Value grade of A, while SO has a Value grade of D.
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
Southern Company (The) (SO) : Free Stock Analysis Report
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