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Xcel Energy Inc. (XEL) - free report >>
Public Service Enterprise Group Incorporated (PEG) - free report >>
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Xcel Energy Inc. (XEL) - free report >>
Public Service Enterprise Group Incorporated (PEG) - free report >>
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XEL or PEG: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Xcel Energy (XEL - Free Report) and PSEG (PEG - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.
Right now, Xcel Energy is sporting a Zacks Rank of #2 (Buy), while PSEG has a Zacks Rank of #3 (Hold). This means that XEL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
XEL currently has a forward P/E ratio of 18.07, while PEG has a forward P/E of 24.03. We also note that XEL has a PEG ratio of 2.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. PEG currently has a PEG ratio of 3.22.
Another notable valuation metric for XEL is its P/B ratio of 1.99. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, PEG has a P/B of 2.78.
These are just a few of the metrics contributing to XEL's Value grade of B and PEG's Value grade of D.
XEL stands above PEG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that XEL is the superior value option right now.