Investors interested in stocks from the Utility - Electric Power sector have probably already heard of CenterPoint Energy (NYSE:CNP) and NextEra Energy (NYSE:NEE). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, CenterPoint Energy is sporting a Zacks Rank of #2 (Buy), while NextEra Energy has a Zacks Rank of #3 (Hold). This means that CNP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
CNP currently has a forward P/E ratio of 17, while NEE has a forward P/E of 27.85. We also note that CNP has a PEG ratio of 3.11. 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. NEE currently has a PEG ratio of 3.48.
Another notable valuation metric for CNP is its P/B ratio of 2.17. 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, NEE has a P/B of 2.91.
These are just a few of the metrics contributing to CNP's Value grade of B and NEE's Value grade of D.
CNP has seen stronger estimate revision activity and sports more attractive valuation metrics than NEE, so it seems like value investors will conclude that CNP is the superior option right now.
CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
NextEra Energy, Inc. (NEE): Free Stock Analysis Report
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Zacks Investment Research