CWT vs. MSEX: Which Stock Is the Better Value Option?

Investors with an interest in Utility - Water Supply stocks have likely encountered both California Water Service Group (CWT) and Middlesex Water (MSEX). 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.

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 Middlesex Water 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 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 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 18.68, while MSEX has a forward P/E of 21.37. We also note that CWT has a PEG ratio of 2.13. 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. MSEX currently has a PEG ratio of 3.65.

Another notable valuation metric for CWT is its P/B ratio of 1.6. 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, MSEX has a P/B of 2.08.

These are just a few of the metrics contributing to CWT's Value grade of B and MSEX's Value grade of D.

CWT has seen stronger estimate revision activity and sports more attractive valuation metrics than MSEX, so it seems like value investors will conclude that CWT is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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