Investors interested in stocks from the Utility - Water Supply sector have probably already heard of SJW (SJW) and American States Water (AWR). 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.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, SJW is sporting a Zacks Rank of #2 (Buy), while American States Water has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that SJW likely has seen a stronger improvement to its earnings outlook than AWR has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
SJW currently has a forward P/E ratio of 20.08, while AWR has a forward P/E of 28.27. We also note that SJW has a PEG ratio of 3.31. 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. AWR currently has a PEG ratio of 4.49.
Another notable valuation metric for SJW is its P/B ratio of 1.37. 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, AWR has a P/B of 3.64.
These metrics, and several others, help SJW earn a Value grade of B, while AWR has been given a Value grade of F.
SJW 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 SJW is likely the superior value option right now.
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American States Water Company (AWR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
