Investors interested in Utility - Electric Power stocks are likely familiar with NiSource (NI) and NextEra Energy (NEE). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both NiSource and NextEra Energy are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture 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.
NI currently has a forward P/E ratio of 20.69, while NEE has a forward P/E of 29.51. We also note that NI has a PEG ratio of 2.91. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NEE currently has a PEG ratio of 3.17.
Another notable valuation metric for NI is its P/B ratio of 2.03. 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, NEE has a P/B of 3.73.
These metrics, and several others, help NI earn a Value grade of B, while NEE has been given a Value grade of D.
Both NI and NEE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NI is the superior value option right now.
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