Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Ameren (AEE - Free Report) and Alliant Energy (LNT - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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, Ameren is sporting a Zacks Rank of #2 (Buy), while Alliant Energy has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AEE is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AEE currently has a forward P/E ratio of 20.19, while LNT has a forward P/E of 20.82. We also note that AEE has a PEG ratio of 2.97. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LNT currently has a PEG ratio of 3.50.
Another notable valuation metric for AEE is its P/B ratio of 2.13. 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, LNT has a P/B of 2.31.
These are just a few of the metrics contributing to AEE's Value grade of B and LNT's Value grade of C.
AEE stands above LNT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AEE is the superior value option right now.