Investors looking for stocks in the Utility - Electric Power sector might want to consider either AES (AES) or Iberdrola S.A. (IBDRY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
AES and Iberdrola S.A. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AES 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 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.
AES currently has a forward P/E ratio of 6.36, while IBDRY has a forward P/E of 19.00. We also note that AES has a PEG ratio of 0.57. 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. IBDRY currently has a PEG ratio of 2.19.
Another notable valuation metric for AES is its P/B ratio of 1.17. 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, IBDRY has a P/B of 1.96.
These metrics, and several others, help AES earn a Value grade of A, while IBDRY has been given a Value grade of D.
AES 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 AES is likely the superior value option right now.
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The AES Corporation (AES): Free Stock Analysis Report Iberdrola S.A. (IBDRY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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