Investors with an interest in Utility - Electric Power stocks have likely encountered both PG&E (PCG) and OGE Energy (OGE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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.
PG&E has a Zacks Rank of #2 (Buy), while OGE Energy 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 PCG has an improving earnings outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PCG currently has a forward P/E ratio of 9.78, while OGE has a forward P/E of 19.09. We also note that PCG has a PEG ratio of 0.62. 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. OGE currently has a PEG ratio of 3.43.
Another notable valuation metric for PCG is its P/B ratio of 1.35. 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, OGE has a P/B of 1.93.
These are just a few of the metrics contributing to PCG's Value grade of A and OGE's Value grade of C.
PCG sticks out from OGE in both our Zacks Rank and Style Scores models, so value investors will likely feel that PCG is the better option right now.
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Pacific Gas & Electric Co. (PCG): Free Stock Analysis Report
OGE Energy Corporation (OGE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).