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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Entergy and NextEra Energy are holding 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. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
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 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 2.65.
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 metrics, and several others, help ETR earn a Value grade of A, 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.