Investors looking for stocks in the Utility - Electric Power sector might want to consider either Pinnacle West (PNW) or Southern Co. (SO). 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 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, Pinnacle West is sporting a Zacks Rank of #2 (Buy), while Southern Co. has a Zacks Rank of #3 (Hold). This means that PNW's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PNW currently has a forward P/E ratio of 16.21, while SO has a forward P/E of 19.41. We also note that PNW has a PEG ratio of 4.10. 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. SO currently has a PEG ratio of 4.85.
Another notable valuation metric for PNW is its P/B ratio of 1.56. 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, SO has a P/B of 2.01.
These metrics, and several others, help PNW earn a Value grade of B, while SO has been given a Value grade of C.
PNW 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 PNW is likely the superior value option right now.
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Pinnacle West Capital Corporation (NYSE:PNW): Free Stock Analysis Report
Southern Company The (NYSE:SO): Free Stock Analysis Report
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