Investors with an interest in Utility - Gas Distribution stocks have likely encountered both 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 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. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
MDU currently has a forward P/E ratio of 17.87, while ATO has a forward P/E of 19.67. We also note that MDU has a PEG ratio of 2.62. 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 2.77.
Another notable valuation metric for MDU is its P/B ratio of 1.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ATO has a P/B of 1.80.
Based on these metrics and many more, MDU holds a Value grade of B, while ATO has a 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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Today, See These 5 Potential Home Runs >>MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
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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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