Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Exelon (EXC) and OGE Energy (OGE). 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 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.
Exelon and OGE Energy are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EXC currently has a forward P/E ratio of 16.12, while OGE has a forward P/E of 20.48. We also note that EXC has a PEG ratio of 2.52. 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. OGE currently has a PEG ratio of 3.26.
Another notable valuation metric for EXC is its P/B ratio of 1.59. 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, OGE has a P/B of 2.01.
These are just a few of the metrics contributing to EXC's Value grade of B and OGE's Value grade of C.
Both EXC and OGE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EXC is the superior value option right now.
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Exelon Corporation (EXC) : Free Stock Analysis Report
OGE Energy Corporation (OGE) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
