Investors looking for stocks in the Utility - Water Supply sector might want to consider either California Water Service Group (CWT) or American Water Works (AWK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
California Water Service Group has a Zacks Rank of #2 (Buy), while American Water Works has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CWT has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
CWT currently has a forward P/E ratio of 18.95, while AWK has a forward P/E of 24.05. We also note that CWT has a PEG ratio of 2.16. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AWK currently has a PEG ratio of 3.25.
Another notable valuation metric for CWT is its P/B ratio of 1.62. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AWK has a P/B of 2.51.
Based on these metrics and many more, CWT holds a Value grade of B, while AWK has a Value grade of D.
CWT has seen stronger estimate revision activity and sports more attractive valuation metrics than AWK, so it seems like value investors will conclude that CWT is the superior option right now.
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California Water Service Group (CWT): Free Stock Analysis Report American Water Works Company, Inc. (AWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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