XEL Vs. LNT: Which Stock Is The Better Value Option?
Zacks Investment Research | Jun 19, 2018 09:30PM ET
Investors interested in Utility - Electric Power stocks are likely familiar with Xcel Energy (XEL) and Alliant Energy (LNT). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Xcel Energy and Alliant Energy are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
XEL currently has a forward P/E ratio of 18.08, while LNT has a forward P/E of 19.38. We also note that XEL has a PEG ratio of 3.17. 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. LNT currently has a PEG ratio of 3.47.
Another notable valuation metric for XEL is its P/B ratio of 1.95. 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, LNT has a P/B of 2.25.
Based on these metrics and many more, XEL holds a Value grade of B, while LNT has a Value grade of C.
Both XEL and LNT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that XEL is the superior value option right now.
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