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MDU vs. ATO: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Utility - Gas Distribution stocks have likely encountered both MDU Resources (MDU - Free Report) and Atmos Energy (ATO - Free Report) . 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.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

MDU Resources and Atmos Energy are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 13.27, while ATO has a forward P/E of 17.42. We also note that MDU has a PEG ratio of 2.21. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ATO currently has a PEG ratio of 2.40.

Another notable valuation metric for MDU is its P/B ratio of 1.45. 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 1.56.

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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