4 Utility Value Stocks to Consider if Rate Slump Continues (ETR, SJW, TEF, POLA)

These stocks are values trading at a discount based on our metrics

The core of value investing is to pick stocks that are currently trading below their intrinsic value and hold them till their prices improve.

utility stocks
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Consistent dividend payout by utilities reduces the possibility of a sudden appreciation in share price. However, value investors could still enter the utility space and locate stocks with strong fundamentals that are presently trading at a discount when compared to industry standards.

The average retail price of electricity continued to slump in 2016. As per a U.S. Energy Information Administration (EIA) release, combined average retail price of electricity (cents per kilowatt hours) dropped 1.25% year over year for all sectors.

According to EIA, the prices of electricity in residential, commercial, industrial and transportation sectors dropped 0.8%, 2.5%, 2.3% and 6.0%, respectively, in 2016. The drop in electricity rates was primarily due to cheap natural gas price and lower demand for power.


While utilities are cash generators, funds generated from internal sources are less than sufficient to carry out long-term projects given their capital intensive nature. In fact, the Mar 2017 interest rate hike is likely to increase the cost of capital and make operations costlier for utilities.

The Fed’s recent rate hike raises concern for the capital intensive utility industry, one may bet on some value stocks from the industry to gain significantly with the odds of the Fed failing to raise rates, as hinted.

Given the rate hike scenario and the possibility of a slump in electricity rates, we fall back on our style score system. This positive score allows investors to eliminate the negative aspects of stocks and pick the winners.

Our research shows that stocks with a Value Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

Utility Stocks to Consider if Rate Slump Continues: Entergy Corporation (ETR)

New Orleans, LA based Entergy Corporation (NYSE:ETR) is primarily engaged in electric power production and retail distribution of power. SJW stock saw solid earnings estimate revisions over the past 60 days with the Zacks Consensus Estimate for 2017 rising 9.1% to $5.02 per share. SJW stock currently sports a Zacks Rank #2 and a Value Style Score of ‘B.’

Entergy Corporation Price and EPS Surprise

Entergy Corporation Price and EPS Surprise | Entergy Corporation Quote

ETR stock is presently trading at a P/E multiple of 14.99, lower than the industry average of 18.49. The long term earnings growth is presently pegged at 1.30%.

Utility Stocks to Consider if Rate Slump Continues: SJW Group (SJW)

San Jose, CA based SJW Group (NYSE:SJW), through its subsidiaries, provides water utility services in the United States. SJW stock saw earnings estimate revisions over the past 60 days with the Zacks Consensus Estimate for 2017 rising 3.9% to $2.15 per share. SJW stock currently sports a Zacks Rank #2 and a Value Style Score of ‘B.’

SJW Corporation Price and EPS Surprise

SJW Corporation Price and EPS Surprise | SJW Corporation Quote

SJW stock is presently trading at a P/E multiple of 22.25, lower than the industry average of 22.81.

Utility Stocks to Consider if Rate Slump Continues: Telefonica S.A. (ADR) (TEF)

Based in Madrid, Spain, Telefonica S.A. (ADR) (NYSE:TEF) provides fixed-line telephone services, wireless communications, Internet access, video and data transmission services, to approximately 313 million customers.

TEF stock saw solid earnings estimate revisions over the past 60 days with the Zacks Consensus Estimate for 2017 rising 16.7% to 84 cents per share. TEF stock has a Value Style Score of ‘B’ and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Telefonica SA Price and EPS Surprise

Telefonica SA Price and EPS Surprise | Telefonica SA Quote

TEF stock is presently trading at a P/E multiple of 13.45, lower than the industry average of 15.31. The long term earnings growth is pegged at 55.53% at the moment.

Utility Stocks to Consider if Rate Slump Continues: Polar Power Inc (POLA)

Gardena, CA based Polar Power Inc (NASDAQ:POLA) designs, manufactures, and sells direct current (DC) power systems for applications in the telecommunications, military, electric vehicle charging, cogeneration, distributed power, and uninterruptable power supply markets.

TEF stock saw earnings estimate revisions over the past 60 days with the Zacks Consensus Estimate for 2017 rising 5.3% to 60 cents per share, and currently sports a Zacks Rank #2 and a Value Style Score of ‘B.’

TEF stock is currently trading at a P/E multiple of 13.33, lower than the industry average of 18.49.

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Entergy Corporation (ETR): Free Stock Analysis Report

SJW Corporation (SJW): Free Stock Analysis Report

Telefonica SA (TEF): Free Stock Analysis Report

Polar Power, Inc. (POLA): Free Stock Analysis Report

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