Investors interested in Utility - Electric Power stocks are likely familiar with PG&E (PCG) and WEC Energy Group (WEC). 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.
Right now, PG&E is sporting a Zacks Rank of #2 (Buy), while WEC Energy Group 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 PCG is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
PCG currently has a forward P/E ratio of 10.24, while WEC has a forward P/E of 20.11. We also note that PCG has a PEG ratio of 0.64. 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. WEC currently has a PEG ratio of 2.66.
Another notable valuation metric for PCG is its P/B ratio of 1.1. 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, WEC has a P/B of 2.45.
These metrics, and several others, help PCG earn a Value grade of A, while WEC has been given a Value grade of C.
PCG has seen stronger estimate revision activity and sports more attractive valuation metrics than WEC, so it seems like value investors will conclude that PCG is the superior 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.
