EBR vs. AVA: Which Stock Is the Better Value Option?
Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Eletrobras (EBR) and Avista (AVA). 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 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.
Eletrobras has a Zacks Rank of #2 (Buy), while Avista has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EBR is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
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.
EBR currently has a forward P/E ratio of 10.86, while AVA has a forward P/E of 21.86. We also note that EBR has a PEG ratio of 0.52. 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. AVA currently has a PEG ratio of 4.06.
Another notable valuation metric for EBR is its P/B ratio of 0.67. 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, AVA has a P/B of 1.37.
These metrics, and several others, help EBR earn a Value grade of A, while AVA has been given a Value grade of C.
EBR stands above AVA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EBR is the superior value option right now.
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Centrais Eltricas Brasileiras SA (EBR) : Free Stock Analysis Report
Avista Corporation (AVA) : Free Stock Analysis Report
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