Investors with an interest in Utility - Electric Power stocks have likely encountered both Vistra Energy Corp. (VST) and Unitil (UTL). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Vistra Energy Corp. has a Zacks Rank of #2 (Buy), while Unitil has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that VST has an improving earnings outlook. But this is only part of the picture for value investors.
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.
VST currently has a forward P/E ratio of 10.85, while UTL has a forward P/E of 26.26. We also note that VST has a PEG ratio of 1.13. 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. UTL currently has a PEG ratio of 6.60.
Another notable valuation metric for VST is its P/B ratio of 1.40. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, UTL has a P/B of 2.41.
These metrics, and several others, help VST earn a Value grade of B, while UTL has been given a Value grade of C.
VST is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that VST is likely the superior value option right now.
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