Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Vistra Energy Corp (VST - Free Report) and Unitil (UTL - 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Vistra Energy Corp has a Zacks Rank of #2 (Buy), while Unitil has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that VST is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
VST currently has a forward P/E ratio of 7.62, while UTL has a forward P/E of 22.11. We also note that VST has a PEG ratio of 0.64. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. UTL currently has a PEG ratio of 4.60.
Another notable valuation metric for VST is its P/B ratio of 1.17. 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, UTL has a P/B of 1.93.
These metrics, and several others, help VST earn a Value grade of A, while UTL has been given a Value grade of C.
VST is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that VST is likely the superior value option right now.