ENGIY vs. PNW: Which Stock Is the Better Value Option?

Investors interested in Utility - Electric Power stocks are likely familiar with 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Right now, ENGIE - Sponsored ADR is sporting a Zacks Rank of #2 (Buy), while Pinnacle West has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ENGIY likely has seen a stronger improvement to its earnings outlook than PNW has recently. But this is just one factor that value investors are interested in.

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.

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.

ENGIY currently has a forward P/E ratio of 12.70, while PNW has a forward P/E of 21.41. We also note that ENGIY has a PEG ratio of 3.51. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. PNW currently has a PEG ratio of 3.68.

Another notable valuation metric for ENGIY is its P/B ratio of 1.63. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, PNW has a P/B of 1.72.

These are just a few of the metrics contributing to ENGIY's Value grade of A 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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