Investors with an interest in Utility - Electric Power stocks have likely encountered both 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks 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 means that EIX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
EIX currently has a forward P/E ratio of 9.39, while NEE has a forward P/E of 22.62. We also note that EIX has a PEG ratio of 0.86. 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 2.81.
Another notable valuation metric for EIX is its P/B ratio of 1.28. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NEE has a P/B of 2.82.
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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