Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Energias de Portugal (EDPFY) and Exelon (EXC). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Energias de Portugal has a Zacks Rank of #2 (Buy), while Exelon 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 EDPFY has an improving earnings 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
EDPFY currently has a forward P/E ratio of 15.44, while EXC has a forward P/E of 17.06. We also note that EDPFY has a PEG ratio of 1.27. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EXC currently has a PEG ratio of 2.55.
Another notable valuation metric for EDPFY is its P/B ratio of 1.21. 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, EXC has a P/B of 1.59.
These metrics, and several others, help EDPFY earn a Value grade of B, while EXC has been given a Value grade of C.
EDPFY 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 EDPFY is likely the superior value option right now.
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