Investors interested in Utility - Electric Power stocks are likely familiar with NorthWestern (NWE) and WEC Energy Group (WEC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, NorthWestern has a Zacks Rank of #2 (Buy), while WEC Energy Group has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NWE has an improving earnings outlook. However, value investors will care about much more than just this.
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.
NWE currently has a forward P/E ratio of 16.14, while WEC has a forward P/E of 18.88. We also note that NWE has a PEG ratio of 2.39. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WEC currently has a PEG ratio of 3.28.
Another notable valuation metric for NWE is its P/B ratio of 1.25. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WEC has a P/B of 2.29.
These are just a few of the metrics contributing to NWE's Value grade of B and WEC's Value grade of C.
NWE 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 NWE is likely the superior value option right now.
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