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CNP vs. AEP: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Utility - Electric Power sector might want to consider either CenterPoint Energy (CNP) or American Electric Power (AEP). 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, CenterPoint Energy is sporting a Zacks Rank of #2 (Buy), while American Electric Power has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CNP has an improving earnings outlook. But this is just one piece of the puzzle 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.

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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.

CNP currently has a forward P/E ratio of 14.45, while AEP has a forward P/E of 19.22. We also note that CNP has a PEG ratio of 2.89. 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. AEP currently has a PEG ratio of 3.32.

Another notable valuation metric for CNP is its P/B ratio of 1.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AEP has a P/B of 2.02.

These metrics, and several others, help CNP earn a Value grade of A, while AEP has been given a Value grade of C.

CNP 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 CNP is likely the superior value option right now.


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CenterPoint Energy, Inc. (CNP) : Free Stock Analysis Report
 
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
 
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