Investors with an interest in Utility - Water Supply stocks have likely encountered both SJW (HTO) and American States Water (AWR). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, SJW has a Zacks Rank of #2 (Buy), while American States Water has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that HTO likely has seen a stronger improvement to its earnings outlook than AWR has recently. But this is just one factor that value investors are interested in.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HTO currently has a forward P/E ratio of 17.48, while AWR has a forward P/E of 23.83. We also note that HTO has a PEG ratio of 4.04. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AWR currently has a PEG ratio of 4.22.
Another notable valuation metric for HTO is its P/B ratio of 1.27. 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, AWR has a P/B of 3.15.
These are just a few of the metrics contributing to HTO's Value grade of B and AWR's Value grade of D.
HTO sticks out from AWR in both our Zacks Rank and Style Scores models, so value investors will likely feel that HTO is the better option right now.
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H2O America (HTO): Free Stock Analysis Report American States Water Company (AWR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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