Investors looking for stocks in the Utility - Electric Power sector might want to consider either Korea Electric Power (KEP - Free Report) or Black Hills (BKH - 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Currently, Korea Electric Power has a Zacks Rank of #1 (Strong Buy), while Black Hills 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 KEP is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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.
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.
KEP currently has a forward P/E ratio of 15.96, while BKH has a forward P/E of 19.40. We also note that KEP has a PEG ratio of 3.19. 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. BKH currently has a PEG ratio of 4.16.
Another notable valuation metric for KEP is its P/B ratio of 0.30. 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, BKH has a P/B of 1.85.
These are just a few of the metrics contributing to KEP's Value grade of A and BKH's Value grade of C.
KEP sticks out from BKH in both our Zacks Rank and Style Scores models, so value investors will likely feel that KEP is the better option right now.