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Entergy Corporation (ETR) - free report >>
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Entergy Corporation (ETR) - free report >>
American Electric Power Company, Inc. (AEP) - free report >>
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ETR vs. AEP: Which Stock Should Value Investors Buy Now?
Investors interested in Utility - Electric Power stocks are likely familiar with Entergy (ETR - Free Report) and American Electric Power (AEP - Free Report) . 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Entergy has a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ETR has an improving earnings outlook. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ETR currently has a forward P/E ratio of 17.84, while AEP has a forward P/E of 18.88. We also note that ETR has a PEG ratio of 3.09. 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. AEP currently has a PEG ratio of 3.38.
Another notable valuation metric for ETR is its P/B ratio of 1.92. 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, AEP has a P/B of 1.99.
These metrics, and several others, help ETR earn a Value grade of B, while AEP has been given a Value grade of C.
ETR stands above AEP thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ETR is the superior value option right now.