Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either Southwest Gas (SWX) or Northwest Natural Gas (NWN). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Southwest Gas and Northwest Natural Gas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SWX has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SWX currently has a forward P/E ratio of 21.48, while NWN has a forward P/E of 29.05. We also note that SWX has a PEG ratio of 5.37. 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. NWN currently has a PEG ratio of 6.70.
Another notable valuation metric for SWX is its P/B ratio of 2. 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, NWN has a P/B of 2.44.
These metrics, and several others, help SWX earn a Value grade of B, while NWN has been given a Value grade of C.
SWX has seen stronger estimate revision activity and sports more attractive valuation metrics than NWN, so it seems like value investors will conclude that SWX is the superior option right now.
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Southwest Gas Corporation (SWX) : Free Stock Analysis Report
Northwest Natural Gas Company (NWN) : Free Stock Analysis Report
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