Investors interested in stocks from the Utility - Electric Power sector have probably already heard of NiSource (NI) and MGE (MGEE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
NiSource and MGE are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that NI likely has seen a stronger improvement to its earnings outlook than MGEE has recently. 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.
NI currently has a forward P/E ratio of 17.16, while MGEE has a forward P/E of 21.58. We also note that NI has a PEG ratio of 2.49. 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. MGEE currently has a PEG ratio of 4.03.
Another notable valuation metric for NI is its P/B ratio of 1.72. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MGEE has a P/B of 2.39.
Based on these metrics and many more, NI holds a Value grade of B, while MGEE has a Value grade of D.
NI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NI is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report