10 Undervalued Utilities Stocks Trading Near Highs

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Utilities stocks represent a defensive sector. Their performance is generally immune to changes in economic activity, and they tend to pay high dividends due to strong cash flows. If you're interested in this sector, we ran a screen you might appreciate.

We began by screening utilities for those trading within 5% of their 52-week highs, indicating strong recent performance. We then screened for those that appear undervalued relative to EPS trends.

Based on the assumption that P/E is equal to a constant k, increases in EPS should be matched by proportionate increases in price. When they don't match up, a mispricing may have occurred. That is, when price does not rise as fast as earnings, the stock may be undervalued.

Of course there is no reason to expect that P/E is equal to a constant k, this is just the assumption for the sake of the screen.

Business section: Investing ideas
Below is the final list of stocks from this screen. These stocks have seen greater increases in EPS than price over the last 30 days, possibly indicating these stocks are undervalued.

Do you think they should be trading higher? (Click here to access free, interactive tools to analyze these ideas.)

1. Ameren: Operates as a public utility company in Missouri and Illinois, the United States. The stock is trading 3.86% below its 52-week high. The EPS estimate for the company's current year increased from 2.31 to 2.35 over the last 30 days, an increase of 1.73%. This increase came during a time when the stock price changed by 0.82% (from 31.65 to 31.91 over the last 30 days).

2. Calpine (NYS: CPN) : An independent wholesale power generation company, owns and operates natural gas-fired and geothermal power plants in North America. The stock is trading 1.64% below its 52-week high. The EPS estimate for the company's current year increased from 0.18 to 0.2 over the last 30 days, an increase of 11.11%. This increase came during a time when the stock price changed by 5.53% (from 15.56 to 16.42 over the last 30 days).

3. Edison International: Engages in the supply of electric energy in central, coastal, and southern California. The stock is trading 1.79% below its 52-week high. The EPS estimate for the company's current year increased from 2.46 to 2.59 over the last 30 days, an increase of 5.28%. This increase came during a time when the stock price changed by 4.1% (from 41.01 to 42.69 over the last 30 days).

4. FirstEnergy (NYS: FE) : Operates as a diversified energy company. The stock is trading 1.56% below its 52-week high. The EPS estimate for the company's current year increased from 3.29 to 3.41 over the last 30 days, an increase of 3.65%. This increase came during a time when the stock price changed by 3.54% (from 42.94 to 44.46 over the last 30 days).

5. Laclede Group: Engages in the retail distribution, sale, and marketing of natural gas. The stock is trading 3.73% below its 52-week high. The EPS estimate for the company's current year increased from 2.68 to 2.69 over the last 30 days, an increase of 0.37%. This increase came during a time when the stock price changed by -4.72% (from 42.61 to 40.6 over the last 30 days).

6. Otter Tail (NAS: OTTR) : Engages in electric and nonelectric operations in the United States and internationally. The stock is trading 1.70% below its 52-week high. The EPS estimate for the company's current year increased from 1.02 to 1.1 over the last 30 days, an increase of 7.84%. This increase came during a time when the stock price changed by -4.9% (from 22.45 to 21.35 over the last 30 days).

7. Pinnacle West Capital: Provides retail and wholesale electric services primarily in the State of Arizona. The stock is trading 0.79% below its 52-week high. The EPS estimate for the company's current year increased from 3.36 to 3.37 over the last 30 days, an increase of 0.3%. This increase came during a time when the stock price changed by -2% (from 48.08 to 47.12 over the last 30 days).

8. Southwest Gas: Engages in the purchase, distribution, and transportation of natural gas in Arizona, Nevada, and California. The stock is trading 0.41% below its 52-week high. The EPS estimate for the company's current year increased from 2.57 to 2.62 over the last 30 days, an increase of 1.95%. This increase came during a time when the stock price changed by 0.28% (from 42.71 to 42.83 over the last 30 days).

9. UIL Holdings (NYS: UIL) : Operates in the energy sector in the United States. The stock is trading 1.56% below its 52-week high. The EPS estimate for the company's current year increased from 2.19 to 2.2 over the last 30 days, an increase of 0.46%. This increase came during a time when the stock price changed by -3.19% (from 35.37 to 34.24 over the last 30 days).

10. Aqua America (NYS: WTR) : Operates regulated utilities that provide water or wastewater services in the United States. The stock is trading 1.76% below its 52-week high. The EPS estimate for the company's current year increased from 1.08 to 1.09 over the last 30 days, an increase of 0.93%. This increase came during a time when the stock price changed by -2.13% (from 22.51 to 22.03 over the last 30 days).

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


Kapitall's Alexander Crawford does not own any of the shares mentioned above. EPS data sourced from Yahoo! Finance.

At the time this article was published Motley Fool newsletter services have recommended buying shares of Otter Tail and Aqua America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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