EIX or ALE: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Edison International (EIX) and Allete (ALE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Edison International and Allete are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that EIX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
EIX currently has a forward P/E ratio of 16.48, while ALE has a forward P/E of 21.93. We also note that EIX has a PEG ratio of 2.77. 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. ALE currently has a PEG ratio of 3.66.
Another notable valuation metric for EIX is its P/B ratio of 1.55. 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, ALE has a P/B of 1.81.
These metrics, and several others, help EIX earn a Value grade of B, while ALE has been given a Value grade of C.
EIX sticks out from ALE in both our Zacks Rank and Style Scores models, so value investors will likely feel that EIX is the better option right now.
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Edison International (EIX) : Free Stock Analysis Report
Allete, Inc. (ALE) : Free Stock Analysis Report
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