RWEOY or WEC: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Utility - Electric Power sector have probably already heard of RWE AG (RWEOY) and WEC Energy Group (WEC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, RWE AG has a Zacks Rank of #1 (Strong Buy), while WEC Energy Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that RWEOY likely has seen a stronger improvement to its earnings outlook than WEC has recently. However, value investors will care about much more than just this.

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.

RWEOY currently has a forward P/E ratio of 19.69, while WEC has a forward P/E of 20.81. We also note that RWEOY has a PEG ratio of 1.78. 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. WEC currently has a PEG ratio of 2.80.

Another notable valuation metric for RWEOY is its P/B ratio of 1.11. 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, WEC has a P/B of 2.7.

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

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

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

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