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NJR vs. NWN: Which Stock Is the Better Value Option?

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Zacks Equity Research
·2 min read
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Investors with an interest in Utility - Gas Distribution stocks have likely encountered both New Jersey Resources (NJR) and Northwest Natural (NWN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, New Jersey Resources is sporting a Zacks Rank of #2 (Buy), while Northwest Natural has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NJR has an improving earnings outlook. But this is only part of the picture for value investors.

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.

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.

NJR currently has a forward P/E ratio of 14.78, while NWN has a forward P/E of 23.17. We also note that NJR has a PEG ratio of 2.46. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NWN currently has a PEG ratio of 7.43.

Another notable valuation metric for NJR is its P/B ratio of 1.57. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NWN has a P/B of 1.79.

These are just a few of the metrics contributing to NJR's Value grade of A and NWN's Value grade of C.

NJR stands above NWN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NJR is the superior value option right now.


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NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
 
Northwest Natural Gas Company (NWN) : Free Stock Analysis Report
 
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Zacks Investment Research