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MDU vs. NJR: Which Stock Is the Better Value Option?
Investors interested in stocks from the Utility - Gas Distribution sector have probably already heard of MDU Resources (MDU - Free Report) and New Jersey Resources (NJR - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
MDU Resources has a Zacks Rank of #2 (Buy), while New Jersey Resources has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MDU has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
MDU currently has a forward P/E ratio of 16.84, while NJR has a forward P/E of 20.12. We also note that MDU has a PEG ratio of 2.96. 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. NJR currently has a PEG ratio of 3.35.
Another notable valuation metric for MDU is its P/B ratio of 1.77. 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, NJR has a P/B of 2.63.
Based on these metrics and many more, MDU holds a Value grade of B, while NJR has a Value grade of C.
MDU 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 MDU is likely the superior value option right now.