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Should Value Investors Look at Public Service Enterprise?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Public Service Enterprise Group IncorporatedPEG stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Public Service Enterprise has a trailing twelve months PE ratio of 15.21, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.12. While Public Service Enterprise's current PE level puts it above its midpoint of 13.91 over the past five years, it comes below the highs for the stock, leaving some room for entry still.

Further, the stock's PE fares slightly better than the Zacks classified Utility sector's trailing twelve months PE ratio, which stands at 15.54. This indicates that the stock is a bit undervalued right now, compared to its peers.

We should also point out that Public Service Enterprise has a forward PE ratio (price relative to this year's earnings) of 14.94, so it is fair to say that a slightly more value-oriented path may be ahead for Public Service Enterprise stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Public Service Enterprise has a P/S ratio of about 2.39. This is a bit lower than the S&P 500 average, which comes in at 3.17 right now, thus making the stock undervalued from this aspect too.

Broad Value Outlook

In aggregate, Public Service Enterprise currently has a Zacks Value Style Score of 'B', putting it into the top 40% of all stocks we cover from this look. This makes Public Service Enterprise a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, its P/CF ratio (another great indicator of value) comes in at 5.86, which is far better than the industry average of 7.09. Clearly, PEG is a solid choice on the value front from multiple angles.

What About the Stock Overall?

While Public Service Enterprise might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'C' and a Momentum score of 'B'. This gives PEG a Zacks VGM score-or its overarching fundamental grade-of 'B'. (You can read more about the Zacks Style Scores here >> )

Notably, the company's recent earnings estimates have quite encouraging. Both, the current quarter and full year have seen two estimates go higher in the past thirty days compared to one lower.

This has had a positive impact on the consensus estimate, as the current quarter consensus estimate has risen by nearly 2% in the past one month, while the full year estimate has climbed marginally by 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Public Service Enterprise Group Incorporated Price and Consensus

Public Service Enterprise Group Incorporated Price and Consensus | Public Service Enterprise Group Incorporated Quote

However, this somewhat bullish trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. Nonetheless, the bullish analyst sentiment indicates that the stock's prospects in the near term look good.

Bottom Line

Public Service Enterprise is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 46% out of over 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the Zacks categorized Utility- Electric Power industry has clearly underperformed the broader market, as you can see below:

Hence, investors might wait for broader factors to turn favorable for this company name first, but once that happens, this stock could be a compelling pick.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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