Investors looking for stocks in the Utility - Electric Power sector might want to consider either DTE Energy (DTE) or American Electric Power (AEP). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
DTE Energy and American Electric Power are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
DTE currently has a forward P/E ratio of 20.83, while AEP has a forward P/E of 22.39. We also note that DTE has a PEG ratio of 3.47. 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. AEP currently has a PEG ratio of 3.96.
Another notable valuation metric for DTE is its P/B ratio of 2.25. 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, AEP has a P/B of 2.36.
These metrics, and several others, help DTE earn a Value grade of B, while AEP has been given a Value grade of C.
Both DTE and AEP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DTE is the superior value option right now.
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DTE Energy Company (DTE) : Free Stock Analysis Report
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
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