Investors interested in Utility - Gas Distribution stocks are likely familiar with Spire (SR) and Atmos Energy (ATO). But which of these two companies is the best option for those looking for undervalued stocks? 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, both Spire and Atmos Energy are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
SR currently has a forward P/E ratio of 15.57, while ATO has a forward P/E of 20.90. We also note that SR has a PEG ratio of 1.48. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ATO currently has a PEG ratio of 2.62.
Another notable valuation metric for SR is its P/B ratio of 1.54. 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 1.98.
Based on these metrics and many more, SR holds a Value grade of B, while ATO has a Value grade of D.
Both SR and ATO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SR is the superior value option right now.
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See This Stock Now for Free >>Spire Inc. (SR) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
