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 stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
PG&E and OGE Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, 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 are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
PCG currently has a forward P/E ratio of 9.99, while OGE has a forward P/E of 19.52. We also note that PCG has a PEG ratio of 0.63. 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 3.50.
Another notable valuation metric for PCG is its P/B ratio of 1.38. 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, OGE has a P/B of 1.98.
Based on these metrics and many more, PCG holds a Value grade of A, while OGE has a Value grade of C.
PCG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PCG is likely the superior value 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).