Investors interested in Utility - Gas Distribution stocks are likely familiar with South Jersey Industries (SJI) and 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.
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 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.
Right now, both South Jersey Industries and Atmos Energy are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.
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.
SJI currently has a forward P/E ratio of 17.28, while ATO has a forward P/E of 21.76. We also note that SJI has a PEG ratio of 1.69. 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. ATO currently has a PEG ratio of 3.02.
Another notable valuation metric for SJI is its P/B ratio of 1.61. 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 1.98.
These are just a few of the metrics contributing to SJI's Value grade of B and ATO's Value grade of C.
Both SJI and ATO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SJI is the superior value option right now.
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South Jersey Industries, Inc. (SJI) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
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