Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Unitil (UTL) and American Electric Power (AEP). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Unitil has a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UTL is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
UTL currently has a forward P/E ratio of 19.74, while AEP has a forward P/E of 20.81. We also note that UTL has a PEG ratio of 2.79. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AEP currently has a PEG ratio of 3.36.
Another notable valuation metric for UTL is its P/B ratio of 1.77. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AEP has a P/B of 2.20.
Based on these metrics and many more, UTL holds a Value grade of B, while AEP has a Value grade of C.
UTL sticks out from AEP in both our Zacks Rank and Style Scores models, so value investors will likely feel that UTL is the better option right now.
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Unitil Corporation (UTL) : Free Stock Analysis Report
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
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