Investors interested in Utility - Gas Distribution stocks are likely familiar with UGI (UGI) and Atmos Energy (ATO). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both UGI and Atmos Energy are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
UGI currently has a forward P/E ratio of 10.94, while ATO has a forward P/E of 20.85. We also note that UGI has a PEG ratio of 2.28. 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. ATO currently has a PEG ratio of 2.94.
Another notable valuation metric for UGI is its P/B ratio of 1.55. 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 1.82.
These metrics, and several others, help UGI earn a Value grade of B, while ATO has been given a Value grade of D.
Both UGI and ATO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that UGI is the superior value option right now.
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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.
