PCG vs. NEE: Which Stock Is the Better Value Option?

Investors with an interest in Utility - Electric Power stocks have likely encountered both PG&E (PCG) and NextEra Energy (NEE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

PG&E and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that PCG likely has seen a stronger improvement to its earnings outlook than NEE has recently. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

PCG currently has a forward P/E ratio of 10.67, while NEE has a forward P/E of 23.25. We also note that PCG has a PEG ratio of 0.67. 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. NEE currently has a PEG ratio of 2.88.

Another notable valuation metric for PCG is its P/B ratio of 1.15. 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, NEE has a P/B of 2.76.

These are just a few of the metrics contributing to PCG's Value grade of A and NEE's Value grade of D.

PCG stands above NEE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PCG is the superior value option right now.

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

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