Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Edison International (EIX) and OGE Energy (OGE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Edison International is sporting a Zacks Rank of #2 (Buy), while OGE Energy has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EIX is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
EIX currently has a forward P/E ratio of 12.51, while OGE has a forward P/E of 20.39. We also note that EIX has a PEG ratio of 1.33. 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. OGE currently has a PEG ratio of 3.66.
Another notable valuation metric for EIX is its P/B ratio of 1.57. 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, OGE has a P/B of 2.07.
Based on these metrics and many more, EIX holds a Value grade of A, while OGE has a Value grade of C.
EIX 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 EIX is likely the superior value option right now.
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Edison International (EIX): Free Stock Analysis Report
OGE Energy Corporation (OGE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).