Investors looking for stocks in the Utility - Electric Power sector might want to consider either E.ON SE (EONGY) or Pinnacle West (PNW). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
E.ON SE and Pinnacle West are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that EONGY likely has seen a stronger improvement to its earnings outlook than PNW has recently. But this is just one factor that value investors are interested in.
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.
EONGY currently has a forward P/E ratio of 9.87, while PNW has a forward P/E of 18.83. We also note that EONGY has a PEG ratio of 0.76. 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. PNW currently has a PEG ratio of 2.91.
Another notable valuation metric for EONGY is its P/B ratio of 1.40. 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, PNW has a P/B of 1.47.
These metrics, and several others, help EONGY earn a Value grade of A, while PNW has been given a Value grade of C.
EONGY 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 EONGY is likely the superior value option right now.
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