Investors interested in Utility - Gas Distribution stocks are likely familiar with MDU Resources (MDU) and Atmos Energy (ATO). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
MDU Resources has a Zacks Rank of #2 (Buy), while Atmos Energy has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that MDU likely has seen a stronger improvement to its earnings outlook than ATO has recently. But this is just one factor that value investors are interested in.
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 13.15, while ATO has a forward P/E of 20.84. We also note that MDU has a PEG ratio of 2.63. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ATO currently has a PEG ratio of 2.89.
Another notable valuation metric for MDU is its P/B ratio of 1.49. 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, ATO has a P/B of 1.90.
Based on these metrics and many more, MDU holds a Value grade of B, while ATO 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
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
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