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American Electric Power Company, Inc. (AEP) - free report >>
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American Electric Power Company, Inc. (AEP) - free report >>
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AEP or MGEE: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of American Electric Power (AEP - Free Report) and MGE (MGEE - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
American Electric Power and MGE 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 AEP is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
AEP currently has a forward P/E ratio of 17.78, while MGEE has a forward P/E of 22.88. We also note that AEP has a PEG ratio of 2.87. 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. MGEE currently has a PEG ratio of 5.42.
Another notable valuation metric for AEP is its P/B ratio of 1.87. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MGEE has a P/B of 2.34.
These metrics, and several others, help AEP earn a Value grade of B, while MGEE has been given a Value grade of D.
AEP sticks out from MGEE in both our Zacks Rank and Style Scores models, so value investors will likely feel that AEP is the better option right now.