Investors interested in Utility - Electric Power stocks are likely familiar with FirstEnergy (FE) and American Electric Power (AEP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
FirstEnergy has a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold) right now. This means that FE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 17.67, while AEP has a forward P/E of 19.27. We also note that FE has a PEG ratio of 2.73. 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. AEP currently has a PEG ratio of 2.92.
Another notable valuation metric for FE is its P/B ratio of 1.95. 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, AEP has a P/B of 2.08.
Based on these metrics and many more, FE holds a Value grade of B, while AEP has a Value grade of C.
FE sticks out from AEP in both our Zacks Rank and Style Scores models, so value investors will likely feel that FE is the better option right now.
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See Our Newest 5 Stocks Set to Double Picks >>FirstEnergy Corporation (FE) : Free Stock Analysis Report
American Electric Power Company, Inc. (AEP) : 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.
