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SWX or NJR: Which Is the Better Value Stock Right Now?

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·2 min read
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Investors with an interest in Utility - Gas Distribution stocks have likely encountered both Southwest Gas (SWX) and New Jersey Resources (NJR). 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 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.

Currently, Southwest Gas has a Zacks Rank of #2 (Buy), while New Jersey Resources has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that SWX likely has seen a stronger improvement to its earnings outlook than NJR has recently. 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.

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.

SWX currently has a forward P/E ratio of 15.27, while NJR has a forward P/E of 20.96. We also note that SWX has a PEG ratio of 3.05. 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. NJR currently has a PEG ratio of 3.49.

Another notable valuation metric for SWX is its P/B ratio of 1.28. 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, NJR has a P/B of 1.74.

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

SWX sticks out from NJR in both our Zacks Rank and Style Scores models, so value investors will likely feel that SWX is the better option right now.

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Southwest Gas Corporation (SWX) : Free Stock Analysis Report
NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
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Zacks Investment Research