PCG vs. WEC: Which Stock Is the Better Value Option?
Investors looking for stocks in the Utility - Electric Power sector might want to consider either PG&E (PCG) or WEC Energy Group (WEC). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
PG&E has a Zacks Rank of #2 (Buy), while WEC Energy Group has a Zacks Rank of #3 (Hold) right now. This means that PCG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
PCG currently has a forward P/E ratio of 8.25, while WEC has a forward P/E of 18.80. We also note that PCG has a PEG ratio of 1.09. 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. WEC currently has a PEG ratio of 2.17.
Another notable valuation metric for PCG is its P/B ratio of 1.12. 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 2.36.
These are just a few of the metrics contributing to PCG's Value grade of A and WEC's 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).
