Back to top

Image: Bigstock

AES vs. XEL: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors with an interest in Utility - Electric Power stocks have likely encountered both AES (AES - Free Report) and Xcel Energy (XEL - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.

Currently, AES has a Zacks Rank of #2 (Buy), while Xcel Energy 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 AES has an improving earnings outlook. But this is only part of the picture 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 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.

AES currently has a forward P/E ratio of 14.12, while XEL has a forward P/E of 26.28. We also note that AES has a PEG ratio of 1.76. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. XEL currently has a PEG ratio of 4.52.

Another notable valuation metric for AES is its P/B ratio of 2.80. 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, XEL has a P/B of 2.87.

These are just a few of the metrics contributing to AES's Value grade of B and XEL's Value grade of D.

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


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


The AES Corporation (AES) - free report >>

Xcel Energy Inc. (XEL) - free report >>

Published in