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 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
DTE Energy has a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold) right now. This means that DTE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
DTE currently has a forward P/E ratio of 20.56, while AEP has a forward P/E of 21. We also note that DTE has a PEG ratio of 3.43. 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. AEP currently has a PEG ratio of 3.72.
Another notable valuation metric for DTE is its P/B ratio of 2.12. 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 2.22.
These metrics, and several others, help DTE earn a Value grade of B, while AEP has been given a Value grade of D.
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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