Investors interested in stocks from the Utility - Electric Power sector have probably already heard of DTE Energy (DTE) and Alliant Energy (LNT). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
DTE Energy has a Zacks Rank of #2 (Buy), while Alliant Energy has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DTE has an improving earnings outlook. 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.
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.
DTE currently has a forward P/E ratio of 18.52, while LNT has a forward P/E of 20.56. We also note that DTE has a PEG ratio of 3.47. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LNT currently has a PEG ratio of 3.74.
Another notable valuation metric for DTE is its P/B ratio of 2.01. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LNT has a P/B of 2.36.
Based on these metrics and many more, DTE holds a Value grade of B, while LNT has a Value grade of C.
DTE 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 DTE is likely the superior value option right now.
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DTE Energy Company (DTE) : Free Stock Analysis Report
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