Investors interested in Utility - Gas Distribution stocks are likely familiar with MDU Resources (MDU) 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
MDU Resources and Atmos Energy are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This means that MDU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
MDU currently has a forward P/E ratio of 18.11, while ATO has a forward P/E of 19.25. We also note that MDU has a PEG ratio of 2.66. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ATO currently has a PEG ratio of 2.75.
Another notable valuation metric for MDU is its P/B ratio of 1.18. 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, ATO has a P/B of 1.77.
These are just a few of the metrics contributing to MDU's Value grade of B and ATO's Value grade of D.
MDU has seen stronger estimate revision activity and sports more attractive valuation metrics than ATO, so it seems like value investors will conclude that MDU is the superior option right now.
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