DTE or AEE: Which Is the Better Value Stock Right Now?
Zacks Investment Research | Jun 29, 2020 11:40PM ET
Investors with an interest in Utility - Electric Power stocks have likely encountered both DTE Energy (DTE) and Ameren (AEE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
DTE Energy and Ameren are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DTE is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
DTE currently has a forward P/E ratio of 16.35, while AEE has a forward P/E of 20.33. We also note that DTE has a PEG ratio of 2.95. 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. AEE currently has a PEG ratio of 2.99.
Another notable valuation metric for DTE is its P/B ratio of 1.71. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AEE has a P/B of 2.09.
Based on these metrics and many more, DTE holds a Value grade of B, while AEE has a Value grade of C.
DTE has seen stronger estimate revision activity and sports more attractive valuation metrics than AEE, so it seems like value investors will conclude that DTE is the superior option right now.
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