RWEOY or OGE: Which Is the Better Value Stock Right Now?

Investors interested in Utility - Electric Power stocks are likely familiar with RWE AG (RWEOY) and OGE Energy (OGE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, RWE AG is sporting a Zacks Rank of #2 (Buy), while OGE Energy has a Zacks Rank of #4 (Sell). This means that RWEOY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

RWEOY currently has a forward P/E ratio of 18.10, while OGE has a forward P/E of 19.35. We also note that RWEOY has a PEG ratio of 1.37. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. OGE currently has a PEG ratio of 3.08.

Another notable valuation metric for RWEOY is its P/B ratio of 0.98. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, OGE has a P/B of 1.94.

Based on these metrics and many more, RWEOY holds a Value grade of B, while OGE has a Value grade of C.

RWEOY 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 RWEOY is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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