Investors looking for stocks in the Utility - Electric Power sector might want to consider either Korea Electric Power (KEP - Free Report) or Pattern Energy . 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.
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.
Right now, Korea Electric Power is sporting a Zacks Rank of #2 (Buy), while Pattern Energy has a Zacks Rank of #3 (Hold). This means that KEP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
KEP currently has a forward P/E ratio of 31.74, while PEGI has a forward P/E of 48.91. We also note that KEP has a PEG ratio of 6.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PEGI currently has a PEG ratio of 24.45.
Another notable valuation metric for KEP is its P/B ratio of 0.25. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, PEGI has a P/B of 1.44.
Based on these metrics and many more, KEP holds a Value grade of A, while PEGI has a Value grade of D.
KEP stands above PEGI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that KEP is the superior value option right now.