Investors interested in Utility - Gas Distribution stocks are likely familiar with Atmos Energy (ATO - Free Report) and ONE Gas (OGS - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Atmos Energy and ONE Gas are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ATO has an improving earnings outlook. 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ATO currently has a forward P/E ratio of 24.84, while OGS has a forward P/E of 26.62. We also note that ATO has a PEG ratio of 3.82. 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. OGS currently has a PEG ratio of 4.55.
Another notable valuation metric for ATO is its P/B ratio of 2.28. 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, OGS has a P/B of 2.30.
Based on these metrics and many more, ATO holds a Value grade of B, while OGS has a Value grade of C.
ATO 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 ATO is likely the superior value option right now.