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 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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4 Undervalued Utilities - Electric 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 Utilities - Electric industry for Thursday, August 10, 2023. 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.

Entergy Corp’s Value Grade

Value Grade:

Entergy Corporation is an integrated energy company engaged in electric power production and retail distribution operations. The Company segments include Utility and Entergy Wholesale Commodities. The Utility segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana. Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. The Company owns and operates power generating fleets with approximately 24,000 megawatts of electric generating capacity, including 5,000 megawatts of nuclear power.

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.

Entergy Corp has a Value Score of 62, which is considered to be undervalued.

When you look at Entergy Corp’s price-to-sales ratio at 1.54 compared to the industry median at 2.00, this company has a lower price relative to revenue compared to its peers. This could make Entergy Corp’s stock more attractive for value investors.

Entergy Corp’s price-earnings ratio is 14.77 compared to the industry median at 18.42. This means it has a lower share price relative to earnings compared to its peers. This could make Entergy Corp more attractive for value investors.

Now, let’s assess Entergy Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 10.0, when compared to the industry median of 12.7, 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. Entergy Corp’s shareholder yield is lower than its industry median ratio of 2.57%. 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. Entergy Corp’s price-to-book ratio is lower than its industry median ratio of 1.57. This could make Entergy Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Entergy Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Entergy Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 17.58. This could make Entergy Corp more attractive because the lower P/FCF ratio indicates that Entergy Corp 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.

Fortis Inc’s Value Grade

Value Grade:

Fortis Inc. is a Canada-based diversified regulated electric and gas utility holding company. The Company's regulated utility businesses includes ITC Investment Holdings Inc., ITC Holdings Corp. and the electric transmission operations of its regulated operating subsidiaries, which include International Transmission Company, Michigan Electric Transmission Company, LLC, ITC Midwest LLC and ITC Great Plains, LLC; UNS Energy Corporation, which primarily includes Tucson Electric Power Company (TEP), UNS Electric, Inc. and UNS Gas, Inc.; CH Energy Group, Inc, which primarily includes Central Hudson Gas and Electric Corporation; FortisBC Energy Inc.; FortisAlberta Inc. and FortisBC Inc. The Company's Non-regulated energy infrastructure consists of Aitken Creek Gas Storage ULC (Aitken Creek) a natural gas storage facility in British Columbia, and Belize Electric Company Limited (BECOL) three hydroelectric generation facilities with a combined capacity of 51 Megawatts in Belize.

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.

Fortis Inc has a Value Score of 65, which is considered to be undervalued.

Fortis Inc’s price-earnings ratio is 13.8 compared to the industry median at 18.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Fortis Inc more attractive for value investors.

Fortis Inc’s price-to-book ratio is higher than its peers. This could make Fortis Inc less attractive for value investors when compared to the industry median at 1.57.

You can read more about Fortis 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.

Korea Electric Power Corp (ADR)’s Value Grade

Value Grade:

Korea Electric Power Corp is a Korea-based company principally engaged in the sale and delivery of electricity. The Company operates its business through four segments. The Electricity Sale Business segment is engaged in the sale and delivery of electricity and the development of power resources, among others. The Nuclear Power Business segment is engaged in the nuclear power, hydropower and pumped power generation business. The Thermal Power Business segment is engaged in power generation business such as bituminous coal, anthracite coal, liquefied natural gas (LNG) and others. The Other Business segment is involved in the design of power plants, the maintenance of power generation facilities, the supply of nuclear fuel, the provision of power information and communications technologies (ICT) services, the operation of renewable and solar power generation businesses, and the emission of greenhouse gases.

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.

Korea Electric Power Corp (ADR) has a Value Score of 95, which is considered to be undervalued.

Korea Electric Power Corp (ADR)’s price-to-book ratio is higher than its peers. This could make Korea Electric Power Corp (ADR) less attractive for value investors when compared to the industry median at 1.57.

You can read more about Korea Electric Power Corp (ADR)’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.

Via Renewables Inc’s Value Grade

Value Grade:

Via Renewables, Inc. is an independent retail energy services company. The Company provides residential and commercial customers in the United States with an alternative choice for natural gas and electricity. The Company operates through two segments: Retail Electricity and Retail Natural Gas. In the Retail Electricity segment, the Company purchases electricity supply through physical and financial transactions with market counterparties and independent system operators (ISOs) and supplies electricity to residential and commercial consumers pursuant to fixed-price and variable-price contracts. In the Retail Natural Gas segment, the Company purchases natural gas supply through physical and financial transactions with market counterparties and supplies natural gas to residential and commercial consumers pursuant to fixed-price and variable-price contracts. The Company operates in approximately 103 utility service territories across 20 states and the District of Columbia.

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.

Via Renewables Inc has a Value Score of 97, which is considered to be undervalued.

Via Renewables Inc’s price-to-book ratio is higher than its peers. This could make Via Renewables Inc less attractive for value investors when compared to the industry median at 1.57.

You can read more about Via Renewables 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 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 4 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.

• Entergy Corp stock has a Value Grade of B.
• Fortis Inc stock has a Value Grade of B.
• Korea Electric Power Corp (ADR) stock has a Value Grade of A.
• Via Renewables Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Utilities - Electric Stocks for Thursday, August 10
• What You Need to Know About Evergy Inc's Q2 Earnings
• What You Need to Know About Hawaiian Electric Industries, Inc.'s Q2 Earnings
• What You Need to Know About Montauk Renewables Inc's Q2 Earnings

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