EXC vs. NEE: Which Stock Is the Better Value Option?

Investors looking for stocks in the Utility - Electric Power sector might want to consider either Exelon (EXC) or 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.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Exelon and NextEra Energy are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EXC has an improving earnings 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

EXC currently has a forward P/E ratio of 15.24, while NEE has a forward P/E of 20.80. We also note that EXC has a PEG ratio of 2.39. 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. NEE currently has a PEG ratio of 2.58.

Another notable valuation metric for EXC is its P/B ratio of 1.52. 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, NEE has a P/B of 2.56.

These metrics, and several others, help EXC earn a Value grade of B, while NEE has been given a Value grade of D.

EXC sticks out from NEE in both our Zacks Rank and Style Scores models, so value investors will likely feel that EXC is the better option right now.

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

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