Investors interested in stocks from the Utility - Gas Distribution sector have probably already heard of New Jersey Resources (NJR - Free Report) and Chesapeake Utilities (CPK - 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.
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.
Right now, New Jersey Resources is sporting a Zacks Rank of #2 (Buy), while Chesapeake Utilities has a Zacks Rank of #3 (Hold). This means that NJR's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
NJR currently has a forward P/E ratio of 24.85, while CPK has a forward P/E of 25.59. We also note that NJR has a PEG ratio of 3.55. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CPK currently has a PEG ratio of 3.66.
Another notable valuation metric for NJR is its P/B ratio of 2.82. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CPK has a P/B of 2.87.
These metrics, and several others, help NJR earn a Value grade of B, while CPK has been given a Value grade of C.
NJR has seen stronger estimate revision activity and sports more attractive valuation metrics than CPK, so it seems like value investors will conclude that NJR is the superior option right now.