Investors interested in stocks from the Utility - Electric Power sector have probably already heard of PGE (POR) and American Electric Power (AEP). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, PGE has a Zacks Rank of #2 (Buy), while American Electric Power 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 POR is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
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.
POR currently has a forward P/E ratio of 17.96, while AEP has a forward P/E of 20.15. We also note that POR has a PEG ratio of 3.41. 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. AEP currently has a PEG ratio of 3.48.
Another notable valuation metric for POR is its P/B ratio of 1.45. 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, AEP has a P/B of 2.11.
Based on these metrics and many more, POR holds a Value grade of B, while AEP has a Value grade of C.
POR stands above AEP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that POR is the superior value option right now.
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Portland General Electric Company (POR): Free Stock Analysis Report
American Electric Power Company, Inc. (AEP): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.