Investors looking for stocks in the Utility - Electric Power sector might want to consider either American Electric Power (AEP - Free Report) or WEC Energy Group (WEC - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both American Electric Power and WEC Energy Group are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
AEP currently has a forward P/E ratio of 19.81, while WEC has a forward P/E of 21.96. We also note that AEP has a PEG ratio of 3.47. 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. WEC currently has a PEG ratio of 5.
Another notable valuation metric for AEP is its P/B ratio of 2.03. 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, WEC has a P/B of 2.36.
Based on these metrics and many more, AEP holds a Value grade of B, while WEC has a Value grade of C.
Both AEP and WEC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AEP is the superior value option right now.