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DTE vs. AEP: Which Stock Is the Better Value Option?

Zacks Equity Research
Applied Materials (AMAT) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors interested in Utility - Electric Power stocks are likely familiar with DTE Energy (DTE) and American Electric Power (AEP). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, DTE Energy is sporting a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DTE 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 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

DTE currently has a forward P/E ratio of 20.04, while AEP has a forward P/E of 20.52. We also note that DTE has a PEG ratio of 3.34. 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 3.63.

Another notable valuation metric for DTE is its P/B ratio of 2.06. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AEP has a P/B of 2.17.

Based on these metrics and many more, DTE holds a Value grade of B, while AEP has a Value grade of C.

DTE has seen stronger estimate revision activity and sports more attractive valuation metrics than AEP, so it seems like value investors will conclude that DTE is the superior 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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