Investors interested in Utility - Electric Power stocks are likely familiar with Ameren (AEE - Free Report) and WEC Energy Group (WEC - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Ameren and WEC Energy Group are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
AEE currently has a forward P/E ratio of 19.94, while WEC has a forward P/E of 20.80. We also note that AEE has a PEG ratio of 3.09. 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. WEC currently has a PEG ratio of 5.04.
Another notable valuation metric for AEE is its P/B ratio of 2.10. 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, WEC has a P/B of 2.24.
These metrics, and several others, help AEE earn a Value grade of B, while WEC has been given a Value grade of C.
Both AEE and WEC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AEE is the superior value option right now.