FE vs. AEE: Which Stock Is the Better Value Option?
Investors with an interest in Utility - Electric Power stocks have likely encountered both FirstEnergy (FE) and Ameren (AEE). 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, FirstEnergy has a Zacks Rank of #2 (Buy), while Ameren 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 FE is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
FE currently has a forward P/E ratio of 15.78, while AEE has a forward P/E of 18.37. We also note that FE has a PEG ratio of 2.50. 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. AEE currently has a PEG ratio of 2.90.
Another notable valuation metric for FE is its P/B ratio of 1.73. 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, AEE has a P/B of 1.99.
These are just a few of the metrics contributing to FE's Value grade of B and AEE's Value grade of C.
FE 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 FE is likely the superior value option right now.
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Ameren Corporation (AEE) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
