Investors interested in Alternative Energy - Other stocks are likely familiar with NRG Yield (CWEN) and Evergy Inc (EVRG). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
NRG Yield has a Zacks Rank of #1 (Strong Buy), while Evergy Inc has a Zacks Rank of #4 (Sell) right now. This means that CWEN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CWEN currently has a forward P/E ratio of 11.83, while EVRG has a forward P/E of 21.02. We also note that CWEN has a PEG ratio of 1.18. 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. EVRG currently has a PEG ratio of 3.18.
Another notable valuation metric for CWEN is its P/B ratio of 1.61. 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, EVRG has a P/B of 1.64.
Based on these metrics and many more, CWEN holds a Value grade of B, while EVRG has a Value grade of C.
CWEN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CWEN is likely the superior value option right now.
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