UGI vs. ATO: Which Stock Is the Better Value Option?
Investors interested in stocks from the Utility - Gas Distribution sector have probably already heard of UGI (UGI) and Atmos Energy (ATO). 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, UGI is sporting a Zacks Rank of #2 (Buy), while Atmos Energy has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UGI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
UGI currently has a forward P/E ratio of 6.74, while ATO has a forward P/E of 17.38. We also note that UGI has a PEG ratio of 0.84. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ATO currently has a PEG ratio of 2.40.
Another notable valuation metric for UGI is its P/B ratio of 1.08. 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, ATO has a P/B of 1.57.
These are just a few of the metrics contributing to UGI's Value grade of A and ATO's Value grade of C.
UGI 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 UGI is likely the superior value option right now.
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UGI Corporation (UGI) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
