ALE or IBDRY: Which Is the Better Value Stock Right Now?
Investors with an interest in Utility - Electric Power stocks have likely encountered both Allete (ALE) and Iberdrola S.A. (IBDRY). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Allete is sporting a Zacks Rank of #2 (Buy), while Iberdrola S.A. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ALE likely has seen a stronger improvement to its earnings outlook than IBDRY has recently. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ALE currently has a forward P/E ratio of 14.95, while IBDRY has a forward P/E of 16.04. We also note that ALE has a PEG ratio of 1.85. 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. IBDRY currently has a PEG ratio of 2.
Another notable valuation metric for ALE is its P/B ratio of 0.93. 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, IBDRY has a P/B of 1.18.
These metrics, and several others, help ALE earn a Value grade of B, while IBDRY has been given a Value grade of C.
ALE 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 ALE is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Allete, Inc. (ALE) : Free Stock Analysis Report
Iberdrola S.A. (IBDRY) : Free Stock Analysis Report
