8 Utilities Stocks Undervalued By The Graham Number

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 |  Includes: AEE, AEP, EIX, ETR, IDA, POR, PPL, SRE
by: Kapitall

Interested in stocks that may have more upside to price in?

For ideas, we ran a screen on the utilities sector for stocks that appear undervalued relative to the Graham Number.

This number was created by the "godfather of value investing" Benjamin Graham, and calculates a stock's maximum fair value based off of its EPS and book value per share (BVPS). Stocks trading below their Graham Number may be undervalued.

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by Graham number.

1. Entergy Corporation (NYSE:ETR): Operates as an integrated energy company in the United States. Market cap of $12.55B. TTM Diluted EPS at $7.92, MRQ Book Value Per Share at $50.92, Graham number at $95.26 (vs. current price at $70.75, implies a potential upside of 34.64%). The stock has gained 3.01% over the last year.

2. Ameren Corporation (NYSE:AEE): Operates as a public utility company in Missouri and Illinois, the United States. Market cap of $7.78B. TTM Diluted EPS at $2.27, MRQ Book Value Per Share at $33.02, Graham number at $41.07 (vs. current price at $32.00, implies a potential upside of 28.33%). The stock has gained 19.24% over the last year.

3. Sempra Energy (NYSE:SRE): Engages in the development of energy infrastructure, operation of utilities, and provision of energy-related products and services worldwide. Market cap of $13.32B. TTM Diluted EPS at $5.55, MRQ Book Value Per Share at $40.20, Graham number at $70.85 (vs. current price at $55.44, implies a potential upside of 27.80%). The stock has gained 10.68% over the last year.

4. IdaCorp, Inc. (NYSE:IDA): Engages in the generation, transmission, distribution, sale, and purchase of electric energy in the United States. Market cap of $2.10B. TTM Diluted EPS at $3.60, MRQ Book Value Per Share at $33.29, Graham number at $51.93 (vs. current price at $41.61, implies a potential upside of 24.80%). The stock has gained 13.69% over the last year.

5. Portland General Electric Company (NYSE:POR): Operates as an integrated electric utility in Oregon. Market cap of $1.88B. TTM Diluted EPS at $1.90, MRQ Book Value Per Share at $21.94, Graham number at $30.63 (vs. current price at $24.72, implies a potential upside of 23.89%). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.26%, current ratio at 1.45, and quick ratio at 1.31. The stock has gained 18.06% over the last year.

6. American Electric Power Co., Inc. (NYSE:AEP): Engages in the generation, transmission, and distribution of electric power to retail customers. Market cap of $20.06B. TTM Diluted EPS at $3.76, MRQ Book Value Per Share at $30.34, Graham number at $50.66 (vs. current price at $41.35, implies a potential upside of 22.52%). The stock has gained 20.62% over the last year.

7. PPL Corporation (NYSE:PPL): Generates and sells electricity; and delivers natural gas to approximately 5.3 million utility customers primarily in the northeastern and northwestern US. Market cap of $16.24B. TTM Diluted EPS at $2.64, MRQ Book Value Per Share at $18.77, Graham number at $33.39 (vs. current price at $27.91, implies a potential upside of 19.64%). The stock has gained 15.22% over the last year.

8. Edison International (NYSE:EIX): Engages in the supply of electric energy in central, coastal, and southern California. Market cap of $13.18B. TTM Diluted EPS at $2.95, MRQ Book Value Per Share at $33.81, Graham number at $47.37 (vs. current price at $40.32, implies a potential upside of 17.49%). The stock has gained 9.92% over the last year.

*Author owns shares of EIX and has no plans to change his position in the next 72 hours. BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I am long EIX.