Investors interested in stocks from the Utility - Electric Power sector have probably already heard of CMS Energy (CMS) and NextEra Energy (NEE). 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, CMS Energy has a Zacks Rank of #2 (Buy), while NextEra Energy has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CMS likely has seen a stronger improvement to its earnings outlook than NEE has recently. But this is only part of the picture for value investors.
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.
CMS currently has a forward P/E ratio of 23.02, while NEE has a forward P/E of 31.18. We also note that CMS has a PEG ratio of 3.29. 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. NEE currently has a PEG ratio of 3.91.
Another notable valuation metric for CMS is its P/B ratio of 3.32. 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, NEE has a P/B of 3.35.
These are just a few of the metrics contributing to CMS's Value grade of B and NEE's Value grade of D.
CMS has seen stronger estimate revision activity and sports more attractive valuation metrics than NEE, so it seems like value investors will conclude that CMS is the superior option right now.
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CMS Energy Corporation (CMS) : Free Stock Analysis Report
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