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ALE vs. EXC: Which Stock Should Value Investors Buy Now?

·2 min read

Investors interested in Utility - Electric Power stocks are likely familiar with Allete (ALE) and Exelon (EXC). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 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.

Currently, both Allete and Exelon are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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 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.

ALE currently has a forward P/E ratio of 15.68, while EXC has a forward P/E of 19.14. We also note that ALE has a PEG ratio of 1.79. 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. EXC currently has a PEG ratio of 3.09.

Another notable valuation metric for ALE is its P/B ratio of 0.99. 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, EXC has a P/B of 1.82.

These metrics, and several others, help ALE earn a Value grade of B, while EXC has been given a Value grade of C.

Both ALE and EXC 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
Exelon Corporation (EXC) : Free Stock Analysis Report
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Zacks Investment Research