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RWEOY or PEG: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2-min read

Investors with an interest in Utility - Electric Power stocks have likely encountered both RWE AG (RWEOY) and PSEG (PEG). 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, RWE AG is sporting a Zacks Rank of #2 (Buy), while PSEG 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 RWEOY 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.

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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.

RWEOY currently has a forward P/E ratio of 12.02, while PEG has a forward P/E of 19.55. We also note that RWEOY has a PEG ratio of 2.70. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PEG currently has a PEG ratio of 6.29.

Another notable valuation metric for RWEOY is its P/B ratio of 2.23. 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, PEG has a P/B of 2.53.

These are just a few of the metrics contributing to RWEOY's Value grade of A and PEG's Value grade of D.

RWEOY 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 RWEOY is likely the superior value option right now.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
RWE AG (RWEOY) : Free Stock Analysis Report
 
Public Service Enterprise Group Incorporated (PEG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research