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.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
MDU Resources and Atmos Energy are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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 18.91, while ATO has a forward P/E of 26.32. We also note that MDU has a PEG ratio of 2.66. 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 3.95.
Another notable valuation metric for MDU is its P/B ratio of 2.12. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, ATO has a P/B of 2.36.
These are just a few of the metrics contributing to MDU’s Value grade of B and ATO’s Value grade of C.
Both MDU and ATO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MDU is the superior value option right now.
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