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BKH vs. PNW: Which Stock Should Value Investors Buy Now?


Investors with an interest in Utility – Electric Power stocks have likely encountered both Black Hills (BKH) and Pinnacle West (PNW). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.

Currently, Black Hills has a Zacks Rank of #2 (Buy), while Pinnacle West has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BKH likely has seen a stronger improvement to its earnings outlook than PNW has recently. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

BKH currently has a forward P/E ratio of 17.91, while PNW has a forward P/E of 18.73. We also note that BKH has a PEG ratio of 4. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company’s expected EPS growth rate. PNW currently has a PEG ratio of 4.19.

Another notable valuation metric for BKH is its P/B ratio of 1.70. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, PNW has a P/B of 1.81.

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

BKH sticks out from PNW in both our Zacks Rank and Style Scores models, so value investors will likely feel that BKH is the better option right now.

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