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Investors interested in Utility - Electric Power stocks are likely familiar with CenterPoint Energy (CNP) and PSEG (PEG). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, CenterPoint Energy is sporting a Zacks Rank of #2 (Buy), while PSEG has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CNP likely has seen a stronger improvement to its earnings outlook than PEG has recently. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

CNP currently has a forward P/E ratio of 18.77, while PEG has a forward P/E of 20.14. We also note that CNP has a PEG ratio of 2.68. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PEG currently has a PEG ratio of 3.08.

Another notable valuation metric for CNP is its P/B ratio of 1.95. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, PEG has a P/B of 2.35.

Based on these metrics and many more, CNP holds a Value grade of B, while PEG has a Value grade of D.

CNP has seen stronger estimate revision activity and sports more attractive valuation metrics than PEG, so it seems like value investors will conclude that CNP is the superior option right now.

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