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Investors interested in Utility - Electric Power stocks are likely familiar with DTE Energy (DTE) and NextEra Energy (NEE). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, DTE Energy has a Zacks Rank of #2 (Buy), while NextEra 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 DTE has an improving earnings 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 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.
DTE currently has a forward P/E ratio of 17.78, while NEE has a forward P/E of 22.40. We also note that DTE has a PEG ratio of 2.21. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NEE currently has a PEG ratio of 2.76.
Another notable valuation metric for DTE is its P/B ratio of 2.14. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NEE has a P/B of 2.64.
These are just a few of the metrics contributing to DTE's Value grade of B and NEE's Value grade of D.
DTE is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that DTE is likely the superior value option right now.
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DTE Energy Company (DTE) : Free Stock Analysis Report
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report