Investors interested in stocks from the Alternative Energy - Other sector have probably already heard of NRG Yield (CWEN - Free Report) and Evergy Inc (EVRG - 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.
Currently, NRG Yield has a Zacks Rank of #1 (Strong Buy), while Evergy Inc has a Zacks Rank of #2 (Buy). This means that CWEN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
CWEN currently has a forward P/E ratio of 12.57, while EVRG has a forward P/E of 24.02. We also note that CWEN has a PEG ratio of 0.50. 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. EVRG currently has a PEG ratio of 3.11.
Another notable valuation metric for CWEN is its P/B ratio of 1.48. 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, EVRG has a P/B of 1.55.
Based on these metrics and many more, CWEN holds a Value grade of A, while EVRG has a Value grade of C.
CWEN stands above EVRG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CWEN is the superior value option right now.