Investors interested in stocks from the Utility - Electric Power sector have probably already heard of PPL (PPL) and DTE Energy (DTE). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, PPL has a Zacks Rank of #2 (Buy), while DTE Energy has a Zacks Rank of #3 (Hold). This means that PPL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
PPL currently has a forward P/E ratio of 16.26, while DTE has a forward P/E of 16.78. We also note that PPL has a PEG ratio of 2.19. 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. DTE currently has a PEG ratio of 2.80.
Another notable valuation metric for PPL is its P/B ratio of 1.35. 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, DTE has a P/B of 1.93.
These metrics, and several others, help PPL earn a Value grade of B, while DTE has been given a Value grade of C.
PPL has seen stronger estimate revision activity and sports more attractive valuation metrics than DTE, so it seems like value investors will conclude that PPL is the superior option right now.
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