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BKH vs. UTL: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Asbury Automotive (ABG) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Investors looking for stocks in the Utility - Electric Power sector might want to consider either Black Hills (BKH) or Unitil (UTL). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Black Hills has a Zacks Rank of #2 (Buy), while Unitil has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BKH is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

BKH currently has a forward P/E ratio of 17.85, while UTL has a forward P/E of 22.05. We also note that BKH has a PEG ratio of 3.98. 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. UTL currently has a PEG ratio of 5.96.

Another notable valuation metric for BKH is its P/B ratio of 1.70. 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, UTL has a P/B of 2.08.

These are just a few of the metrics contributing to BKH's Value grade of B and UTL's Value grade of C.

BKH sticks out from UTL in both our Zacks Rank and Style Scores models, so value investors will likely feel that BKH is the better option right now.


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