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ETR vs. NEE: 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 Entergy (ETR - Free Report) or 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Entergy and NextEra Energy are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.

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.

ETR currently has a forward P/E ratio of 14.28, while NEE has a forward P/E of 21.72. We also note that ETR has a PEG ratio of 2.53. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NEE currently has a PEG ratio of 2.59.

Another notable valuation metric for ETR is its P/B ratio of 1.53. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NEE has a P/B of 2.55.

These metrics, and several others, help ETR earn a Value grade of B, while NEE has been given a Value grade of D.

Both ETR and NEE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ETR is the superior value option right now.


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