Investors with an interest in Utility - Gas Distribution stocks have likely encountered both Southwest Gas (SWX) and 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Southwest Gas has a Zacks Rank of #2 (Buy), while Northwest Natural Gas has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SWX likely has seen a stronger improvement to its earnings outlook than NWN 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SWX currently has a forward P/E ratio of 21.15, while NWN has a forward P/E of 30.72. We also note that SWX has a PEG ratio of 5.29. 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 7.09.
Another notable valuation metric for SWX is its P/B ratio of 1.96. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NWN has a P/B of 2.61.
Based on these metrics and many more, SWX holds a Value grade of B, while NWN has a Value grade of C.
SWX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SWX is likely the superior value 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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