Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Iberdrola S.A. (IBDRY) and American Electric Power (AEP). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Iberdrola S.A. and American Electric Power are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that IBDRY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
IBDRY currently has a forward P/E ratio of 17.29, while AEP has a forward P/E of 19.18. We also note that IBDRY has a PEG ratio of 2.62. 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. AEP currently has a PEG ratio of 2.98.
Another notable valuation metric for IBDRY is its P/B ratio of 1.82. 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 1.95.
Based on these metrics and many more, IBDRY holds a Value grade of B, while AEP has a Value grade of C.
IBDRY 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 IBDRY is likely the superior value option right now.
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Iberdrola S.A. (IBDRY): Free Stock Analysis Report American Electric Power Company, Inc. (AEP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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