Investors interested in Utility - Electric Power stocks are likely familiar with Edison International (EIX) and NextEra Energy (NEE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Edison International has a Zacks Rank of #2 (Buy), while NextEra Energy has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EIX is likely seeing its earnings outlook improve to a greater extent. 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.
EIX currently has a forward P/E ratio of 8.82, while NEE has a forward P/E of 22.62. We also note that EIX has a PEG ratio of 1.26. 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. NEE currently has a PEG ratio of 2.87.
Another notable valuation metric for EIX is its P/B ratio of 1.2. 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, NEE has a P/B of 2.81.
These are just a few of the metrics contributing to EIX's Value grade of A and NEE's Value grade of D.
EIX 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 EIX is likely the superior value option right now.
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Edison International (EIX): Free Stock Analysis Report NextEra Energy, Inc. (NEE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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