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SWX or OGS: Which Is the Better Value Stock Right Now?

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Investors interested in Utility - Gas Distribution stocks are likely familiar with Southwest Gas (SWX - Free Report) and ONE Gas (OGS - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Southwest Gas has a Zacks Rank of #2 (Buy), while ONE Gas has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SWX is likely seeing its earnings outlook improve to a greater extent. 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 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 17.85, while OGS has a forward P/E of 20.88. We also note that SWX has a PEG ratio of 3.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. OGS currently has a PEG ratio of 3.80.

Another notable valuation metric for SWX is its P/B ratio of 1.43. 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 1.78.

These are just a few of the metrics contributing to SWX's Value grade of B and OGS's Value grade of C.

SWX has seen stronger estimate revision activity and sports more attractive valuation metrics than OGS, so it seems like value investors will conclude that SWX is the superior option right now.


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