Investors looking for stocks in the Utility - Electric Power sector might want to consider either Pampa Energia (PAM) or Southern Co. (SO). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Pampa Energia and Southern Co. have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
PAM currently has a forward P/E ratio of 3.47, while SO has a forward P/E of 19.98. We also note that PAM has a PEG ratio of 0.17. 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. SO currently has a PEG ratio of 4.44.
Another notable valuation metric for PAM is its P/B ratio of 0.46. 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, SO has a P/B of 2.04.
Based on these metrics and many more, PAM holds a Value grade of A, while SO has a Value grade of C.
Both PAM and SO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PAM is the superior value option right now.
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Pampa Energia S.A. (PAM) : Free Stock Analysis Report
Southern Company (The) (SO) : Free Stock Analysis Report
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