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BKH vs. SO: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Utility - Electric Power sector might want to consider either Black Hills (BKH - Free Report) or 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.

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.

Right now, Black Hills is sporting a Zacks Rank of #2 (Buy), while Southern Co. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BKH is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

BKH currently has a forward P/E ratio of 17.10, while SO has a forward P/E of 18.79. We also note that BKH has a PEG ratio of 3.28. 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 3.73.

Another notable valuation metric for BKH is its P/B ratio of 1.57. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SO has a P/B of 2.04.

These metrics, and several others, help BKH earn a Value grade of A, while SO has been given a Value grade of C.

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


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