Investors with an interest in Utility - Electric Power stocks have likely encountered both Edison International (EIX) and OGE Energy (OGE). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both Edison International and OGE Energy have a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
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 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.
EIX currently has a forward P/E ratio of 9.59, while OGE has a forward P/E of 19.70. We also note that EIX has a PEG ratio of 0.88. 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. OGE currently has a PEG ratio of 2.82.
Another notable valuation metric for EIX is its P/B ratio of 1.27. 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 1.88.
These are just a few of the metrics contributing to EIX's Value grade of A and OGE's Value grade of C.
Both EIX and OGE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EIX is the superior value option right now.
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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.
