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MDU vs. NJR: Which Stock Is the Better Value Option?
Investors interested in Utility - Gas Distribution stocks are likely familiar with MDU Resources (MDU - Free Report) and New Jersey Resources (NJR - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Both MDU Resources and New Jersey Resources have a Zacks Rank of # 2 (Buy) right now. 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 factor that value investors are interested in.
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 14.80, while NJR has a forward P/E of 20.27. We also note that MDU has a PEG ratio of 2.47. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NJR currently has a PEG ratio of 3.38.
Another notable valuation metric for MDU is its P/B ratio of 1.84. 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, NJR has a P/B of 2.61.
These are just a few of the metrics contributing to MDU's Value grade of B and NJR's Value grade of D.
Both MDU and NJR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MDU is the superior value option right now.