Investors with an interest in Utility - Electric Power stocks have likely encountered both FirstEnergy (FE) and WEC Energy Group (WEC). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, FirstEnergy is sporting a Zacks Rank of #2 (Buy), while WEC Energy Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that FE likely has seen a stronger improvement to its earnings outlook than WEC has recently. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
FE currently has a forward P/E ratio of 18.10, while WEC has a forward P/E of 21.18. We also note that FE has a PEG ratio of 2.80. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WEC currently has a PEG ratio of 3.12.
Another notable valuation metric for FE is its P/B ratio of 1.87. 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, WEC has a P/B of 2.58.
These metrics, and several others, help FE earn a Value grade of B, while WEC has been given a Value grade of C.
FE has seen stronger estimate revision activity and sports more attractive valuation metrics than WEC, so it seems like value investors will conclude that FE is the superior option right now.
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FirstEnergy Corporation (FE): Free Stock Analysis Report WEC Energy Group, Inc. (WEC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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