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CMS vs. NEE: Which Stock Should Value Investors Buy Now?

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Investors interested in Utility - Electric Power stocks are likely familiar with CMS Energy (CMS - Free Report) and NextEra Energy (NEE - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

CMS Energy and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CMS'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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

CMS currently has a forward P/E ratio of 18.13, while NEE has a forward P/E of 20.86. We also note that CMS has a PEG ratio of 2.40. 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. NEE currently has a PEG ratio of 2.43.

Another notable valuation metric for CMS is its P/B ratio of 2.17. 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, NEE has a P/B of 2.47.

Based on these metrics and many more, CMS holds a Value grade of B, while NEE has a Value grade of D.

CMS has seen stronger estimate revision activity and sports more attractive valuation metrics than NEE, so it seems like value investors will conclude that CMS is the superior option right now.


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NextEra Energy, Inc. (NEE) - free report >>

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