Investors looking for stocks in the Utility - Electric Power sector might want to consider either Edison International (EIX) or NextEra Energy (NEE). But which of these two stocks presents investors with the better value opportunity right now? 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.
Edison International and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EIX 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
EIX currently has a forward P/E ratio of 9.56, while NEE has a forward P/E of 22.19. We also note that EIX has a PEG ratio of 0.87. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NEE currently has a PEG ratio of 2.75.
Another notable valuation metric for EIX is its P/B ratio of 1.27. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NEE has a P/B of 2.63.
These are just a few of the metrics contributing to EIX's Value grade of A and NEE's Value grade of D.
EIX sticks out from NEE in both our Zacks Rank and Style Scores models, so value investors will likely feel that EIX is the better 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.
