PNM vs. PEG: Which Stock Is the Better Value Option?

PEG PNM

Investors interested in stocks from the Utility - Electric Power sector have probably already heard of PNM Resources (PNM - Free Report) and PSEG (PEG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, PNM Resources is sporting a Zacks Rank of #2 (Buy), while PSEG has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PNM has an improving earnings 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 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.

PNM currently has a forward P/E ratio of 17.58, while PEG has a forward P/E of 17.90. We also note that PNM has a PEG ratio of 3.52. 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. PEG currently has a PEG ratio of 4.95.

Another notable valuation metric for PNM is its P/B ratio of 1.75. 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, PEG has a P/B of 2.24.

These are just a few of the metrics contributing to PNM's Value grade of B and PEG's Value grade of C.

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

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