Investors looking for stocks in the Utility - Electric Power sector might want to consider either RWE AG (RWEOY) or WEC Energy Group (WEC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Both RWE AG and WEC Energy Group 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.
RWEOY currently has a forward P/E ratio of 12.60, while WEC has a forward P/E of 24.18. We also note that RWEOY has a PEG ratio of 2.83. 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. WEC currently has a PEG ratio of 3.98.
Another notable valuation metric for RWEOY is its P/B ratio of 2.33. 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, WEC has a P/B of 2.92.
These metrics, and several others, help RWEOY earn a Value grade of A, while WEC has been given a Value grade of C.
Both RWEOY and WEC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RWEOY is the superior value option right now.
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