SWX or OGS: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either Southwest Gas (SWX) or ONE Gas (OGS). 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.
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.
Southwest Gas and ONE Gas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that SWX likely has seen a stronger improvement to its earnings outlook than OGS has recently. However, value investors will care about much more than just this.
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 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.
SWX currently has a forward P/E ratio of 15.95, while OGS has a forward P/E of 19.53. We also note that SWX has a PEG ratio of 2.90. 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. OGS currently has a PEG ratio of 3.91.
Another notable valuation metric for SWX is its P/B ratio of 1.37. 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, OGS has a P/B of 1.72.
These are just a few of the metrics contributing to SWX's Value grade of B and OGS's Value grade of D.
SWX stands above OGS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SWX is the superior value option right now.
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