Investors with an interest in Utility - Electric Power stocks have likely encountered both RWE AG (RWEOY) 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.
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, RWE AG is sporting a Zacks Rank of #1 (Strong Buy), while WEC Energy Group has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that RWEOY likely has seen a stronger improvement to its earnings outlook than WEC has recently. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
RWEOY currently has a forward P/E ratio of 12.29, while WEC has a forward P/E of 24.03. We also note that RWEOY has a PEG ratio of 2.76. 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. WEC currently has a PEG ratio of 3.95.
Another notable valuation metric for RWEOY is its P/B ratio of 2.30. 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, WEC has a P/B of 2.90.
These metrics, and several others, help RWEOY earn a Value grade of A, while WEC has been given a Value grade of C.
RWEOY stands above WEC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RWEOY is the superior value option right now.
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