AES vs. UTL: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of AES (AES) and Unitil (UTL). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both AES and Unitil have a Zacks Rank of # 2 (Buy) right now. 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. However, value investors will care about much more than just this.
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.
AES currently has a forward P/E ratio of 11.48, while UTL has a forward P/E of 25.68. We also note that AES has a PEG ratio of 1.35. 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. UTL currently has a PEG ratio of 5.89.
Another notable valuation metric for AES is its P/B ratio of 1.86. 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, UTL has a P/B of 2.39.
These metrics, and several others, help AES earn a Value grade of A, while UTL has been given a Value grade of C.
Both AES and UTL are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AES is the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.