ENGIY or PNW: Which Is the Better Value Stock Right Now?

Investors with an interest in Utility - Electric Power stocks have likely encountered both ENGIE - Sponsored ADR (ENGIY) and Pinnacle West (PNW). 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 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.

ENGIE - Sponsored ADR has a Zacks Rank of #1 (Strong Buy), while Pinnacle West has a Zacks Rank of #3 (Hold) right now. This means that ENGIY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.

ENGIY currently has a forward P/E ratio of 12.92, while PNW has a forward P/E of 22.71. We also note that ENGIY has a PEG ratio of 3.57. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PNW currently has a PEG ratio of 3.91.

Another notable valuation metric for ENGIY is its P/B ratio of 1.66. 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, PNW has a P/B of 1.82.

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

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

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

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