Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Utilities - Electric industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Utilities - Electric Stock News

Before choosing which top Utilities - Electric stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The fundamental outlook of the industry over the next twelve months is neutral. The industry is predicted to experience negative effects from several near-term operating headwinds, but these are to be balanced out by record-level projections for capital spending that is expected to support earnings growth. Specifically, because many expect that U.S. will enter a recession in the near future, economic conditions such as housing starts and unemployment could begin to deteriorate, leading to slow growth in retail electric demand. According to the U.S. Energy Information Administration (EIA), annual residential electricity sales are forecasted to decline around 2% in 2023, while commercial and industrial sales growth is expected to be flat, as well as 2.2% growth in residential electric sales, near flat commercial sales growth, and around 1.2% growth in industrial sales for 2024. Furthermore, due to higher labor costs, higher supply, and increasing interest rates, operations and maintenance expenses and borrowing cost are expected to remain high or increase for debt-heavy industries such as the electric utilities industry. For these reasons, utilities are seeking regulatory assistance, for utilities without interim rate relief mechanisms, this situation can increase “regulatory lag” — the delay in time between when utilities make needed expenditures and when their regulators authorize new rates to recover the costs. Recent trends also indicate a stricter regulatory environment expected to continue in the near-term, which will see downward trends in authorized return on equity (ROE), a key driver of utility earnings. Data from Regulatory Research Associates (RRA) through December 27, 2022, shows that the average electric utility authorized ROE was 9.54%, somewhat above the 2021 full-year average of 9.38%. On the other hand, electric grid and gas main repairs and upgrades, investment in electric transmission infrastructure, and new clean power generation are projected to lead to record levels of capital expenditures. This should expand utility rate bases, provide opportunity for new rate increases, and allow utilities to tap into tax incentives for clean energy investments.

Why Focus on Undervalued Utilities - Electric Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Utilities - Electric Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Utilities - Electric industry for Thursday, January 25, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Utilities - Electric industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Ameren Illinois Co’s Value Grade

Value Grade:

Ameren Illinois Company, doing business as Ameren Illinois, is a utility holding company. The Company operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois. Ameren Illinois supplies electric and natural gas utility service to a 43,700 square mile area in central and southern Illinois. Ameren Illinois supplies electric service to 1.2 million customers and natural gas service to 0.8 million customers. Its segments include Ameren Missouri, Ameren Illinois Electric Distribution, Ameren Illinois Natural Gas, and Ameren Illinois Transmission. The Ameren Missouri segment includes all of the operations of Ameren Missouri. The Ameren Illinois Electric Distribution consists of the electric distribution business of Ameren Illinois. The Ameren Illinois Natural Gas consists of the natural gas business of Ameren Illinois. The Ameren Transmission consists of the aggregated electric transmission businesses of Ameren Illinois and ATXI.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Ameren Illinois Co has a Value Score of 99, which is considered to be undervalued.

When you look at Ameren Illinois Co’s price-to-sales ratio at 0.44 compared to the industry median at 1.65, this company has a lower price relative to revenue compared to its peers. This could make Ameren Illinois Co’s stock more attractive for value investors.

Ameren Illinois Co’s price-earnings ratio is 2.80 compared to the industry median at 16.32. This means it has a lower share price relative to earnings compared to its peers. This could make Ameren Illinois Co more attractive for value investors.

Now, let’s assess Ameren Illinois Co’s EV/EBITDA ratio, also known as enterprise multiple. At 5.0, when compared to the industry median of 11.6, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Ameren Illinois Co’s shareholder yield is higher than its industry median ratio of 3.18%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Ameren Illinois Co’s price-to-book ratio is lower than its industry median ratio of 1.43. This could make Ameren Illinois Co more attractive to investors looking for a new addition to their portfolio.

Evergy Inc’s Value Grade

Value Grade:

Evergy, Inc. (Evergy) is a utility holding company. The Company operates primarily through its wholly owned subsidiaries, Evergy Kansas Central, Inc. (Evergy Kansas Central), Evergy Metro, Inc. (Evergy Metro), Evergy Missouri West, Inc. (Evergy Missouri West), and Evergy Transmission Company, LLC (Evergy Transmission Company). Evergy Kansas Central is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Metro is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas. Evergy Missouri West is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri. Evergy Transmission Company owns 13.5% of Transource Energy, LLC with the remaining 86.5% owned by AEP Transmission Holding Company, LLC. Transource is focused on the development of electric transmission projects.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Evergy Inc has a Value Score of 61, which is considered to be undervalued.

Evergy Inc’s price-earnings ratio is 16.7 compared to the industry median at 16.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Evergy Inc less attractive for value investors.

Evergy Inc’s price-to-book ratio is higher than its peers. This could make Evergy Inc less attractive for value investors when compared to the industry median at 1.43.

You can read more about Evergy Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Wisconsin Electric Power Company’s Value Grade

Value Grade:

Wisconsin Electric Power Company is a holding company. The Company is primarily engaged in the business of generating and distributing electricity in Wisconsin and the Upper Peninsula of Michigan, and distributing natural gas in Wisconsin. The Company conducts its operations through three segments: electric utility, natural gas utility and steam utility. The electric utility segment is engaged in the generation, distribution, and sale of electricity in southeastern, east central, and northern Wisconsin and the Upper Peninsula of Michigan. The natural gas utility segment is engaged in the purchase, distribution, and sale of natural gas to retail customers and the transportation of customer-owned natural gas in its service areas within southeastern, east central and northern Wisconsin. The steam utility segment produces, distributes and sells steam to space heating and processing customers in metropolitan Milwaukee, Wisconsin.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Wisconsin Electric Power Company has a Value Score of 94, which is considered to be undervalued.

Wisconsin Electric Power Company’s price-earnings ratio is 4.6 compared to the industry median at 16.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Wisconsin Electric Power Company more attractive for value investors.

Wisconsin Electric Power Company’s price-to-book ratio is higher than its peers. This could make Wisconsin Electric Power Company less attractive for value investors when compared to the industry median at 1.43.

You can read more about Wisconsin Electric Power Company’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Utilities - Electric Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Utilities - Electric stocks as well as other industrys.

Choosing Which of the 3 Best Utilities - Electric Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Ameren Illinois Co stock has a Value Grade of A.
• Evergy Inc stock has a Value Grade of B.
• Wisconsin Electric Power Company stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Utilities - Electric industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Utilities - Electric Stocks

Want to learn more about Utilities - Electric stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Utilities - Electric Stocks for Thursday, January 25
• 6 Undervalued Utilities - Electric Stocks for Wednesday, January 24
• Is Brazilian Electric Power Co - ADR (EBR) a Good Dividend Stock?
• Is Brazilian Electric Power Co - ADR (EBR) Stock a Good Investment?

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