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 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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3 Undervalued Electric Utilities 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 Electric Utilities industry for Friday, January 03, 2025. 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.

Eversource Energy’s Value Grade

Value Grade:

Eversource Energy, a public utility holding company, engages in the energy delivery business. The company operates through Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution segments. It is involved in the transmission and distribution of electricity; solar power facilities; and distribution of natural gas. The company operates regulated water utilities that provide water services to approximately 241,000 customers. It serves residential, commercial, industrial, municipal and fire protection, and other customers in Connecticut, Massachusetts, and New Hampshire. The company was formerly known as Northeast Utilities and changed its name to Eversource Energy in April 2015. Eversource Energy was incorporated in 1927 and is headquartered in Springfield, Massachusetts.

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.

Eversource Energy has a Value Score of 62, which is considered to be undervalued.

When you look at Eversource Energy’s price-to-sales ratio at 1.75 compared to the industry median at 1.91, this company has a lower price relative to revenue compared to its peers. This could make Eversource Energy’s stock more attractive for value investors.

Now, let’s assess Eversource Energy’s EV/EBITDA ratio, also known as enterprise multiple. At 10.9, when compared to the industry median of 11.4, 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. Eversource Energy’s shareholder yield is lower than its industry median ratio of 3.05%. 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. Eversource Energy’s price-to-book ratio is lower than its industry median ratio of 1.70. This could make Eversource Energy more attractive to investors looking for a new addition to their portfolio.

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 76, 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 1.70.

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.

Portland General Electric Company’s Value Grade

Value Grade:

Portland General Electric Company, an integrated electric utility company, engages in the generation, wholesale purchase, transmission, distribution, and retail sale of electricity in the state of Oregon. It operates six thermal plants, three wind farms, and seven hydroelectric facilities. As of December 31, 2023, the company owned an electric transmission system consisting of 1,254 circuit miles, including 287 circuit miles of 500 kilovolt line, 413 circuit miles of 230 kilovolt line, and 554 miles of 115 kilovolt line; and served 934 thousand retail customers in 51 cities. It also has 28,868 circuit miles of distribution lines. Portland General Electric Company was founded in 1889 and is headquartered in Portland, Oregon.

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.

Portland General Electric Company has a Value Score of 75, which is considered to be undervalued.

Portland General Electric Company’s price-earnings ratio is 12.9 compared to the industry median at 19.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Portland General Electric Company more attractive for value investors.

Portland General Electric Company’s price-to-book ratio is higher than its peers. This could make Portland General Electric Company less attractive for value investors when compared to the industry median at 1.70.

You can read more about Portland General Electric 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 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 3 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.

• Eversource Energy stock has a Value Grade of B.
• Hawaiian Electric Industries, Inc. stock has a Value Grade of B.
• Portland General Electric Company stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Electric Utilities Stocks for Friday, January 03
• Which Is a Better Investment, Empresa Distribuidora y Comercializadora Norte Sociedad Anónima or OGE Energy Corp. Stock?
• Which Is a Better Investment, Centrais Elétricas Brasileiras S.A. - Eletrobrás or FirstEnergy Corp. Stock?
• Which Is a Better Investment, Centrais Elétricas Brasileiras S.A. - Eletrobrás or PG&E; Corporation Stock?

AAII Disclaimer

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