In This Article:
Investors looking for stocks in the Utility - Electric Power sector might want to consider either E.ON SE (EONGY) or Pinnacle West (PNW). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
E.ON SE has a Zacks Rank of #2 (Buy), while Pinnacle West has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EONGY has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
EONGY currently has a forward P/E ratio of 12, while PNW has a forward P/E of 20.54. We also note that EONGY has a PEG ratio of 3.76. 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. PNW currently has a PEG ratio of 9.69.
Another notable valuation metric for EONGY is its P/B ratio of 1.45. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, PNW has a P/B of 1.54.
These metrics, and several others, help EONGY earn a Value grade of A, while PNW has been given a Value grade of C.
EONGY sticks out from PNW in both our Zacks Rank and Style Scores models, so value investors will likely feel that EONGY is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
E.ON SE (EONGY) : Free Stock Analysis Report
Pinnacle West Capital Corporation (PNW) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).