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

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Investors with an interest in Utility - Electric Power stocks have likely encountered both CenterPoint Energy (CNP - Free Report) and Southern Co. (SO - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

CenterPoint Energy and Southern Co. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CNP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CNP currently has a forward P/E ratio of 18.10, while SO has a forward P/E of 18.91. We also note that CNP has a PEG ratio of 2.41. 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. SO currently has a PEG ratio of 4.73.

Another notable valuation metric for CNP is its P/B ratio of 1.79. 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 2.10.

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

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


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