Investors with an interest in Utility - Electric Power stocks have likely encountered both Edison International (EIX) and NextEra Energy (NEE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, Edison International has a Zacks Rank of #2 (Buy), while NextEra Energy 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 EIX is likely seeing its earnings outlook improve to a greater extent. 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 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.
EIX currently has a forward P/E ratio of 9.35, while NEE has a forward P/E of 22.81. We also note that EIX has a PEG ratio of 0.86. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NEE currently has a PEG ratio of 2.84.
Another notable valuation metric for EIX is its P/B ratio of 1.24. 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, NEE has a P/B of 2.71.
These metrics, and several others, help EIX earn a Value grade of A, while NEE has been given a Value grade of D.
EIX 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 EIX is likely the superior value option right now.
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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
