U.S. Markets closed

PAM vs. SO: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in Utility - Electric Power stocks are likely familiar with Pampa Energia (PAM) and Southern Co. (SO). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, both Pampa Energia and Southern Co. are holding a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

PAM currently has a forward P/E ratio of 3.98, while SO has a forward P/E of 19.89. We also note that PAM has a PEG ratio of 0.19. 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 4.42.

Another notable valuation metric for PAM is its P/B ratio of 0.49. 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 2.02.

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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Pampa Energia S.A. (PAM) : Free Stock Analysis Report
 
Southern Company (The) (SO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.