Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the Electric Utilities 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.

Why Focus on Undervalued Electric Utilities 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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4 Undervalued Electric Utilities Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Electric Utilities industry for Monday, November 18, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Electric Utilities 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.

Companhia Energética de Minas Gerais - CEMIG’s Value Grade

Value Grade:

Companhia Energética de Minas Gerais - CEMIG, through its subsidiaries, engages in the generation, transmission, distribution, and sale of energy in Brazil. As of December 31, 2023, the company operated 57 hydro plants with a total capacity of 5,010.4 MW, 9 wind farms with a total capacity of 175.7 MW, and 2 photovoltaic power stations with a total capacity of 3.9 MW; 344,006 miles of distribution lines; and 4,653 miles of transmission lines. It is also involved in the acquisition, transportation, and distribution of gas and its sub products and derivatives; sale and trading of energy; construction, implementation, operation and maintenance of electricity transmission; marketing and intermediation of energy-related business; and distributed generation, account services, cogeneration, energy efficiency, and supply and storage management activities. The company was incorporated in 1952 and is headquartered in Belo Horizonte, Brazil.

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.

Companhia Energética de Minas Gerais - CEMIG has a Value Score of 100, which is considered to be undervalued.

When you look at Companhia Energética de Minas Gerais - CEMIG’s price-to-sales ratio at 0.20 compared to the industry median at 2.11, this company has a lower price relative to revenue compared to its peers. This could make Companhia Energética de Minas Gerais - CEMIG’s stock more attractive for value investors.

Companhia Energética de Minas Gerais - CEMIG’s price-earnings ratio is 5.00 compared to the industry median at 20.60. This means it has a lower share price relative to earnings compared to its peers. This could make Companhia Energética de Minas Gerais - CEMIG more attractive for value investors.

Now, let’s assess Companhia Energética de Minas Gerais - CEMIG’s EV/EBITDA ratio, also known as enterprise multiple. At 3.6, when compared to the industry median of 11.1, 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. Companhia Energética de Minas Gerais - CEMIG’s shareholder yield is higher than its industry median ratio of 2.80%. 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. Companhia Energética de Minas Gerais - CEMIG’s price-to-book ratio is lower than its industry median ratio of 1.78. This could make Companhia Energética de Minas Gerais - CEMIG more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Companhia Energética de Minas Gerais - CEMIG’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Companhia Energética de Minas Gerais - CEMIG’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.35. This could make Companhia Energética de Minas Gerais - CEMIG more attractive because the lower P/FCF ratio indicates that Companhia Energética de Minas Gerais - CEMIG is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Centrais Elétricas Brasileiras S.A. - Eletrobrás’s Value Grade

Value Grade:

Centrais Elétricas Brasileiras S.A. - Eletrobrás, through its subsidiaries, engages in the generation, transmission, and commercialization of electricity in Brazil. The company generates electricity through hydroelectric, thermoelectric, nuclear, wind, and solar plants. As of December 31, 2023, it owned and operated 44 hydroelectric plants with a total capacity of 42,293.5 megawatt (MW); 5 thermal plants, including coal and gas power generation units with a total installed capacity of 1,632 MW; and two nuclear power plants comprising Angra 1 with an installed capacity of 657 MW and Angra 2 with an installed capacity of 1350 MW. It also owns and operates 66,539.17 kilometers of transmission lines. The company was incorporated in 1962 and is based in Rio De Janeiro, Brazil.

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.

Centrais Elétricas Brasileiras S.A. - Eletrobrás has a Value Score of 98, which is considered to be undervalued.

Centrais Elétricas Brasileiras S.A. - Eletrobrás’s price-earnings ratio is 7.4 compared to the industry median at 20.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Centrais Elétricas Brasileiras S.A. - Eletrobrás more attractive for value investors.

Centrais Elétricas Brasileiras S.A. - Eletrobrás’s price-to-book ratio is higher than its peers. This could make Centrais Elétricas Brasileiras S.A. - Eletrobrás less attractive for value investors when compared to the industry median at 1.78.

You can read more about Centrais Elétricas Brasileiras S.A. - Eletrobrás’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.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima’s Value Grade

Value Grade:

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima is involved in the distribution and sale of electricity in Argentina. The company was incorporated in 1992 and is based in Buenos Aires, Argentina. Empresa Distribuidora y Comercializadora Norte Sociedad Anónima operates as a subsidiary of Empresa de Energía del Cono Sur S.A..

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.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima has a Value Score of 79, which is considered to be undervalued.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima’s price-earnings ratio is 242.8 compared to the industry median at 20.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Empresa Distribuidora y Comercializadora Norte Sociedad Anónima less attractive for value investors.

Empresa Distribuidora y Comercializadora Norte Sociedad Anónima’s price-to-book ratio is higher than its peers. This could make Empresa Distribuidora y Comercializadora Norte Sociedad Anónima less attractive for value investors when compared to the industry median at 1.78.

You can read more about Empresa Distribuidora y Comercializadora Norte Sociedad Anónima’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.

Hawaiian Electric Industries, Inc.’s Value Grade

Value Grade:

Hawaiian Electric Industries, Inc., together with its subsidiaries, engages in the electric utility businesses in the United States. It operates in three segments: Electric Utility, Bank, and Other. The Electric Utility segment engages in the production, purchase, transmission, distribution, and sale of electricity in the islands of Oahu, Hawaii, Maui, Lanai, and Molokai. Its renewable energy sources and potential sources include wind, solar, photovoltaic, geothermal, wave, hydroelectric, municipal waste, and other biofuels. This segment serves suburban communities, resorts, the United States Armed Forces installations, and agricultural operations. The Bank segment operates a federally chartered savings bank that offers banking and other financial services to consumers and businesses, including savings and checking accounts; and loans comprising residential and commercial real estate, residential mortgage, construction and development, multifamily residential and commercial real estate, consumer, and commercial loans. The Other segment invests in non-regulated renewable energy and sustainable infrastructure in the State of Hawaii. Hawaiian Electric Industries, Inc. was founded in 1891 and is headquartered in Honolulu, Hawaii.

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.

Hawaiian Electric Industries, Inc. has a Value Score of 73, which is considered to be undervalued.

Hawaiian Electric Industries, Inc.’s price-to-book ratio is higher than its peers. This could make Hawaiian Electric Industries, Inc. less attractive for value investors when compared to the industry median at 1.78.

You can read more about Hawaiian Electric Industries, 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.

Other Electric Utilities 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 Electric Utilities stocks as well as other industrys.

Choosing Which of the 4 Best Electric Utilities 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.

• Companhia Energética de Minas Gerais - CEMIG stock has a Value Grade of A.
• Centrais Elétricas Brasileiras S.A. - Eletrobrás stock has a Value Grade of A.
• Empresa Distribuidora y Comercializadora Norte Sociedad Anónima stock has a Value Grade of B.
• Hawaiian Electric Industries, Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the Electric Utilities 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 Electric Utilities Stocks

Want to learn more about Electric Utilities 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.

• 4 Undervalued Electric Utilities Stocks for Monday, November 18
• 3 Undervalued Electric Utilities Stocks for Thursday, November 14
• 3 Undervalued Electric Utilities Stocks for Wednesday, November 13
• 3 Undervalued Electric Utilities Stocks for Tuesday, November 12

AAII Disclaimer

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