Investors interested in stocks from the Utility - Electric Power sector have probably already heard of CenterPoint Energy (CNP) and MGE (MGEE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both CenterPoint Energy and MGE are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
CNP currently has a forward P/E ratio of 19.02, while MGEE has a forward P/E of 22.56. We also note that CNP has a PEG ratio of 2.72. 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. MGEE currently has a PEG ratio of 4.22.
Another notable valuation metric for CNP is its P/B ratio of 1.93. 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, MGEE has a P/B of 2.53.
These are just a few of the metrics contributing to CNP's Value grade of B and MGEE's Value grade of D.
Both CNP and MGEE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CNP 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.
