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What Defines a Value Stock?
A value stock traditionally has a lower price when compared to stock prices of companies in the same industry. This indicates that the company may be undervalued, as investors are not expressing as much interest in such companies. The most commonly used way to check for value is with the price-to-earnings multiple, or P/E. A low P/E multiple is a good indication that the stock is undervalued.
The following stocks are considered to be notable value stocks in the utilities sector:
Cia Paranaense De Energia (NYSE:ELP) - P/E: 6.14
Kenon Hldgs (NYSE:KEN) - P/E: 4.35
NRG Energy (NYSE:NRG) - P/E: 2.11
Spark Energy (NASDAQ:SPKE) - P/E: 8.43
Pampa Energia (NYSE:PAM) - P/E: 0.06
This quarter, Cia Paranaense De Energia experienced a decrease in earnings per share, which was 1.09 in Q2 and is now 0.46. Most recently, the company reported a dividend yield of 6.26%, which has increased by 4.11% from last quarter's yield of 2.15%.
Most recently, Kenon Hldgs reported earnings per share at 1.09, whereas in Q2 earnings per share sat at 0.02. Kenon Hldgs does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.
This quarter, NRG Energy experienced a decrease in earnings per share, which was 1.27 in Q2 and is now 1.1. The company's most recent dividend yield sits at 3.62%, which has increased by 0.07% from 3.55% last quarter.
Most recently, Spark Energy reported earnings per share at 0.52, whereas in Q2 earnings per share sat at 0.62. Its most recent dividend yield is at 8.46%, which has decreased by 1.89% from 10.35% in the previous quarter.
Pampa Energia has reported Q3 earnings per share at 0.05, which has decreased by 16.67% compared to Q2, which was 0.06. Pampa Energia does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.
The Significance: A value stock may need some time to rebound from its undervalued position. The risk of investing in a value stock is that this emergence may never materialize.
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