Investors with an interest in Utility - Electric Power stocks have likely encountered both Entergy (ETR - Free Report) and NextEra Energy (NEE - 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.
Right now, both Entergy and NextEra Energy are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
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 12.65, while NEE has a forward P/E of 22.23. We also note that ETR has a PEG ratio of 1.81. 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 2.65.
Another notable valuation metric for ETR is its P/B ratio of 1.80. 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 2.21.
These are just a few of the metrics contributing to ETR's Value grade of A and NEE's 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.