ALE vs. NEE: Which Stock Is the Better Value Option?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Allete (ALE) and NextEra Energy (NEE). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Allete and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALE has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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 14.70, while NEE has a forward P/E of 20.98. We also note that ALE has a PEG ratio of 1.81. 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. NEE currently has a PEG ratio of 2.50.
Another notable valuation metric for ALE is its P/B ratio of 0.92. 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, NEE has a P/B of 2.47.
These are just a few of the metrics contributing to ALE's Value grade of B and NEE's Value grade of D.
ALE has seen stronger estimate revision activity and sports more attractive valuation metrics than NEE, so it seems like value investors will conclude that ALE is the superior option right now.
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Allete, Inc. (ALE) : Free Stock Analysis Report
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
