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ALE or HE: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 min read

Investors with an interest in Utility - Electric Power stocks have likely encountered both Allete (ALE) and Hawaiian Electric (HE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Allete has a Zacks Rank of #2 (Buy), while Hawaiian Electric has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ALE likely has seen a stronger improvement to its earnings outlook than HE has recently. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

ALE currently has a forward P/E ratio of 17.14, while HE has a forward P/E of 18.35. We also note that ALE has a PEG ratio of 1.85. 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. HE currently has a PEG ratio of 7.14.

Another notable valuation metric for ALE is its P/B ratio of 1.09. 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, HE has a P/B of 1.98.

These are just a few of the metrics contributing to ALE's Value grade of B and HE's Value grade of C.

ALE stands above HE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ALE is the superior value option right now.


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Allete, Inc. (ALE) : Free Stock Analysis Report
 
Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report
 
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Zacks Investment Research