Investors looking for stocks in the Utility - Electric Power sector might want to consider either PG&E (PCG) or CenterPoint Energy (CNP). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both PG&E and CenterPoint Energy are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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.
PCG currently has a forward P/E ratio of 11.04, while CNP has a forward P/E of 22.42. We also note that PCG has a PEG ratio of 0.69. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CNP currently has a PEG ratio of 2.83.
Another notable valuation metric for PCG is its P/B ratio of 1.19. 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, CNP has a P/B of 2.34.
These metrics, and several others, help PCG earn a Value grade of A, while CNP has been given a Value grade of C.
Both PCG and CNP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PCG is the superior value option right now.
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Pacific Gas & Electric Co. (PCG): Free Stock Analysis Report CenterPoint Energy, Inc. (CNP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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