NWN vs. SWX: Which Stock Is the Better Value Option?
Investors with an interest in Utility - Gas Distribution stocks have likely encountered both Northwest Natural (NWN) and Southwest Gas (SWX). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Northwest Natural is sporting a Zacks Rank of #2 (Buy), while Southwest Gas has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NWN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
NWN currently has a forward P/E ratio of 15.90, while SWX has a forward P/E of 19.10. We also note that NWN has a PEG ratio of 4.30. 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. SWX currently has a PEG ratio of 4.78.
Another notable valuation metric for NWN is its P/B ratio of 1.23. 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, SWX has a P/B of 1.38.
Based on these metrics and many more, NWN holds a Value grade of B, while SWX has a Value grade of C.
NWN has seen stronger estimate revision activity and sports more attractive valuation metrics than SWX, so it seems like value investors will conclude that NWN is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Northwest Natural Gas Company (NWN) : Free Stock Analysis Report
Southwest Gas Corporation (SWX) : Free Stock Analysis Report
