PNM vs. NEE: Which Stock Should Value Investors Buy Now?
PNM vs. NEE: Which Stock Is the Better Value Option?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of PNM Resources (PNM) and NextEra Energy (NEE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, PNM Resources is sporting a Zacks Rank of #2 (Buy), while NextEra Energy has a Zacks Rank of #3 (Hold). This means that PNM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
PNM currently has a forward P/E ratio of 18.51, while NEE has a forward P/E of 35.87. We also note that PNM has a PEG ratio of 3.55. 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. NEE currently has a PEG ratio of 4.01.
Another notable valuation metric for PNM is its P/B ratio of 1.75. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NEE has a P/B of 3.99.
These metrics, and several others, help PNM earn a Value grade of B, while NEE has been given a Value grade of D.
PNM sticks out from NEE in both our Zacks Rank and Style Scores models, so value investors will likely feel that PNM is the better option right now.
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PNM Resources, Inc. (PNM): Free Stock Analysis Report
NextEra Energy, Inc. (NEE): Free Stock Analysis Report
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