Investors interested in stocks from the Utility - Electric Power sector have probably already heard of PG&E (PCG) and OGE Energy (OGE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, PG&E has a Zacks Rank of #2 (Buy), while OGE Energy has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PCG has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
PCG currently has a forward P/E ratio of 10.05, while OGE has a forward P/E of 19.23. We also note that PCG has a PEG ratio of 0.63. 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 3.45.
Another notable valuation metric for PCG is its P/B ratio of 1.39. 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, OGE has a P/B of 1.95.
These metrics, and several others, help PCG earn a Value grade of A, while OGE has been given a Value grade of C.
PCG stands above OGE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PCG 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.
