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AVA or XEL: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors interested in Utility - Electric Power stocks are likely familiar with Avista (AVA) and Xcel Energy (XEL). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

Right now, Avista is sporting a Zacks Rank of #2 (Buy), while Xcel Energy has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that AVA likely has seen a stronger improvement to its earnings outlook than XEL has recently. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

AVA currently has a forward P/E ratio of 19.92, while XEL has a forward P/E of 23.53. We also note that AVA has a PEG ratio of 3.75. 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. XEL currently has a PEG ratio of 3.97.

Another notable valuation metric for AVA is its P/B ratio of 1.35. 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, XEL has a P/B of 2.57.

These metrics, and several others, help AVA earn a Value grade of A, while XEL has been given a Value grade of C.

AVA stands above XEL thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AVA is the superior value option right now.


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