Investors interested in Utility - Electric Power stocks are likely familiar with Avista (AVA) and OGE Energy (OGE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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, Avista is sporting a Zacks Rank of #2 (Buy), while OGE Energy has a Zacks Rank of #3 (Hold). This means that AVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
AVA currently has a forward P/E ratio of 16.07, while OGE has a forward P/E of 19.87. We also note that AVA has a PEG ratio of 2.65. 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. OGE currently has a PEG ratio of 3.15.
Another notable valuation metric for AVA is its P/B ratio of 1.28. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, OGE has a P/B of 1.97.
These are just a few of the metrics contributing to AVA's Value grade of B and OGE's Value grade of D.
AVA 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 AVA is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Avista Corporation (AVA): Free Stock Analysis Report OGE Energy Corporation (OGE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
