ALE or PNW: Which Is the Better Value Stock Right Now?
Investors with an interest in Utility - Electric Power stocks have likely encountered both Allete (ALE) and Pinnacle West (PNW). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both Allete and Pinnacle West are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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 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.
ALE currently has a forward P/E ratio of 14.71, while PNW has a forward P/E of 18.02. We also note that ALE has a PEG ratio of 1.82. 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. PNW currently has a PEG ratio of 3.25.
Another notable valuation metric for ALE is its P/B ratio of 0.92. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PNW has a P/B of 1.41.
These are just a few of the metrics contributing to ALE's Value grade of B and PNW's Value grade of C.
Both ALE and PNW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ALE is the superior value option right now.
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Allete, Inc. (ALE) : Free Stock Analysis Report
Pinnacle West Capital Corporation (PNW) : Free Stock Analysis Report
