Investors looking for stocks in the Utility - Electric Power sector might want to consider either Pinnacle West (PNW) or IdaCorp (IDA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Pinnacle West is sporting a Zacks Rank of #2 (Buy), while IdaCorp has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PNW is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PNW currently has a forward P/E ratio of 17.05, while IDA has a forward P/E of 17.78. We also note that PNW has a PEG ratio of 2.64. 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. IDA currently has a PEG ratio of 4.83.
Another notable valuation metric for PNW is its P/B ratio of 1.33. 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, IDA has a P/B of 1.58.
These metrics, and several others, help PNW earn a Value grade of B, while IDA has been given a Value grade of D.
PNW stands above IDA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PNW is the superior value option right now.
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