SJI vs. ATO: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either South Jersey Industries (SJI) or Atmos Energy (ATO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
South Jersey Industries has a Zacks Rank of #2 (Buy), while Atmos Energy has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SJI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
SJI currently has a forward P/E ratio of 13.14, while ATO has a forward P/E of 18.36. We also note that SJI has a PEG ratio of 0.54. 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 2.50.
Another notable valuation metric for SJI is its P/B ratio of 1.36. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ATO has a P/B of 1.64.
These are just a few of the metrics contributing to SJI's Value grade of B and ATO's Value grade of C.
SJI sticks out from ATO in both our Zacks Rank and Style Scores models, so value investors will likely feel that SJI is the better 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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