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NRG vs. NEE: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Utility - Electric Power stocks have likely encountered both NRG Energy (NRG - Free Report) and NextEra Energy (NEE - 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.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

NRG Energy and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that NRG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

NRG currently has a forward P/E ratio of 3.77, while NEE has a forward P/E of 27.04. We also note that NRG has a PEG ratio of 0.31. 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. NEE currently has a PEG ratio of 2.80.

Another notable valuation metric for NRG is its P/B ratio of 2.03. 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, NEE has a P/B of 3.33.

Based on these metrics and many more, NRG holds a Value grade of A, while NEE has a Value grade of D.

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


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