Investors with an interest in Utility - Gas Distribution stocks have likely encountered both MDU Resources (MDU) and Northwest Natural (NWN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
MDU Resources and Northwest Natural are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that MDU likely has seen a stronger improvement to its earnings outlook than NWN has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
MDU currently has a forward P/E ratio of 17.97, while NWN has a forward P/E of 29.93. We also note that MDU has a PEG ratio of 2.53. 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. NWN currently has a PEG ratio of 6.65.
Another notable valuation metric for MDU is its P/B ratio of 2.03. 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, NWN has a P/B of 2.47.
Based on these metrics and many more, MDU holds a Value grade of B, while NWN has a Value grade of C.
MDU is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that MDU is likely the superior value option right now.
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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
Northwest Natural Gas Company (NWN) : Free Stock Analysis Report
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