Investors interested in stocks from the Utility - Electric Power sector have probably already heard of NRG Energy (NRG) and OGE Energy (OGE). 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 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.
Right now, NRG Energy is sporting a Zacks Rank of #2 (Buy), while OGE Energy has a Zacks Rank of #3 (Hold). This means that NRG'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
NRG currently has a forward P/E ratio of 6.85, while OGE has a forward P/E of 19.84. We also note that NRG has a PEG ratio of 0.49. 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. OGE currently has a PEG ratio of 5.72.
Another notable valuation metric for NRG is its P/B ratio of 1.89. 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, OGE has a P/B of 2.01.
These metrics, and several others, help NRG earn a Value grade of A, while OGE has been given a Value grade of C.
NRG has seen stronger estimate revision activity and sports more attractive valuation metrics than OGE, so it seems like value investors will conclude that NRG is the superior option right now.
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NRG Energy, Inc. (NRG) : Free Stock Analysis Report
OGE Energy Corporation (OGE) : Free Stock Analysis Report
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