Investors interested in stocks from the Utility - Electric Power sector have probably already heard of Avista (AVA) and OGE Energy (OGE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Both Avista and OGE Energy have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

AVA currently has a forward P/E ratio of 15.15, while OGE has a forward P/E of 18.62. We also note that AVA has a PEG ratio of 2.50. 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. OGE currently has a PEG ratio of 3.08.

Another notable valuation metric for AVA is its P/B ratio of 1.21. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, OGE has a P/B of 1.88.

Based on these metrics and many more, AVA holds a Value grade of B, while OGE has a Value grade of C.

Both AVA and OGE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that AVA is the superior value option right now.

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Avista Corporation (AVA) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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