SBS or AWR: Which Is the Better Value Stock Right Now?

Investors interested in Utility - Water Supply stocks are likely familiar with Sabesp (SBS) and American States Water (AWR). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Sabesp has a Zacks Rank of #2 (Buy), while American States Water has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SBS has an improving earnings outlook. But this is just one piece of the puzzle 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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

SBS currently has a forward P/E ratio of 5.91, while AWR has a forward P/E of 22.85. We also note that SBS has a PEG ratio of 1.73. 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. AWR currently has a PEG ratio of 3.30.

Another notable valuation metric for SBS is its P/B ratio of 2.43. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, AWR has a P/B of 3.12.

These metrics, and several others, help SBS earn a Value grade of B, while AWR has been given a Value grade of D.

SBS has seen stronger estimate revision activity and sports more attractive valuation metrics than AWR, so it seems like value investors will conclude that SBS is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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