Investors with an interest in Utility - Electric Power stocks have likely encountered both CenterPoint Energy (CNP) and Hawaiian Electric (HE). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
CenterPoint Energy has a Zacks Rank of #2 (Buy), while Hawaiian Electric has a Zacks Rank of #3 (Hold) right now. This means that CNP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
CNP currently has a forward P/E ratio of 17.01, while HE has a forward P/E of 23.73. We also note that CNP has a PEG ratio of 3.32. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HE currently has a PEG ratio of 5.96.
Another notable valuation metric for CNP is its P/B ratio of 2.16. 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, HE has a P/B of 2.20.
These metrics, and several others, help CNP earn a Value grade of B, while HE has been given a Value grade of C.
CNP stands above HE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CNP is the superior value option right now.
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CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report
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