Investors interested in Utility - Electric Power stocks are likely familiar with Dominion Energy (D) and OGE Energy (OGE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Dominion Energy has a Zacks Rank of #2 (Buy), while OGE Energy 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 D has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
D currently has a forward P/E ratio of 16.17, while OGE has a forward P/E of 18.40. We also note that D has a PEG ratio of 1.19. 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. OGE currently has a PEG ratio of 3.56.
Another notable valuation metric for D is its P/B ratio of 1.76. 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, OGE has a P/B of 1.81.
Based on these metrics and many more, D holds a Value grade of B, while OGE has a Value grade of C.
D sticks out from OGE in both our Zacks Rank and Style Scores models, so value investors will likely feel that D is the better option right now.
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OGE Energy Corporation (OGE) : Free Stock Analysis Report
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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.
