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PAM vs. SO: Which Stock Should Value Investors Buy Now?

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Investors interested in Utility - Electric Power stocks are likely familiar with Pampa Energia (PAM - Free Report) and Southern Co. (SO - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Pampa Energia has a Zacks Rank of #1 (Strong Buy), while Southern Co. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that PAM likely has seen a stronger improvement to its earnings outlook than SO has recently. But this is just one factor that value investors are interested in.

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 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.

PAM currently has a forward P/E ratio of 3.06, while SO has a forward P/E of 18.59. We also note that PAM has a PEG ratio of 0.47. 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. SO currently has a PEG ratio of 4.65.

Another notable valuation metric for PAM is its P/B ratio of 0.33. 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, SO has a P/B of 1.92.

These are just a few of the metrics contributing to PAM's Value grade of A and SO's Value grade of C.

PAM sticks out from SO in both our Zacks Rank and Style Scores models, so value investors will likely feel that PAM is the better option right now.


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