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SWX vs. OGS: Which Stock Should Value Investors Buy Now?

Investors with an interest in Utility - Gas Distribution stocks have likely encountered both Southwest Gas (SWX) and ONE Gas (OGS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Southwest Gas and ONE Gas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that SWX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

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 16.43, while OGS has a forward P/E of 19.30. We also note that SWX has a PEG ratio of 3.29. 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. OGS currently has a PEG ratio of 3.51.

Another notable valuation metric for SWX is its P/B ratio of 1.31. 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, OGS has a P/B of 1.65.

These are just a few of the metrics contributing to SWX's Value grade of B and OGS's 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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