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MDU vs. ATO: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either MDU Resources (MDU) or Atmos Energy (ATO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, MDU Resources is sporting a Zacks Rank of #1 (Strong Buy), while Atmos Energy has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MDU is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

MDU currently has a forward P/E ratio of 18.41, while ATO has a forward P/E of 23.77. We also note that MDU has a PEG ratio of 2.59. 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. ATO currently has a PEG ratio of 3.40.

Another notable valuation metric for MDU is its P/B ratio of 2.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ATO has a P/B of 2.28.

These are just a few of the metrics contributing to MDU's Value grade of B and ATO's Value grade of C.

MDU sticks out from ATO in both our Zacks Rank and Style Scores models, so value investors will likely feel that MDU is the better option right now.


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MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
 
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
 
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