Investors interested in Utility - Gas Distribution stocks are likely familiar with Atmos Energy (ATO - Free Report) and Chesapeake Utilities (CPK - 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.
Atmos Energy and Chesapeake Utilities are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ATO currently has a forward P/E ratio of 22.63, while CPK has a forward P/E of 22.78. We also note that ATO has a PEG ratio of 3.23. 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. CPK currently has a PEG ratio of 3.80.
Another notable valuation metric for ATO is its P/B ratio of 2.12. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CPK has a P/B of 2.57.
Based on these metrics and many more, ATO holds a Value grade of B, while CPK has a Value grade of C.
Both ATO and CPK are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ATO is the superior value option right now.