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FE or CMS: Which Is the Better Value Stock Right Now?

Zacks Equity Research
Updated
Crown Castle (CCI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors with an interest in Utility - Electric Power stocks have likely encountered both FirstEnergy (FE) and CMS Energy (CMS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Both FirstEnergy and CMS Energy have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.

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.

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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.

FE currently has a forward P/E ratio of 15.36, while CMS has a forward P/E of 21.57. We also note that FE has a PEG ratio of 2.56. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CMS currently has a PEG ratio of 3.49.

Another notable valuation metric for FE is its P/B ratio of 2.49. 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, CMS has a P/B of 3.04.

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

Both FE and CMS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FE is the superior value option right now.


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FirstEnergy Corporation (FE) : Free Stock Analysis Report
 
CMS Energy Corporation (CMS) : Free Stock Analysis Report
 
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