Investors with an interest in Utility - Gas Distribution stocks have likely encountered both MDU Resources (MDU - 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.
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.
MDU Resources and Chesapeake Utilities are sporting Zacks Ranks of #1 (Strong 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 MDU has an improving earnings outlook. But this is only part of the picture for value investors.
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.
MDU currently has a forward P/E ratio of 16.98, while CPK has a forward P/E of 23.22. We also note that MDU has a PEG ratio of 2.39. 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 3.32.
Another notable valuation metric for MDU is its P/B ratio of 2.07. 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 2.75.
Based on these metrics and many more, MDU holds a Value grade of B, while CPK has a Value grade of C.
MDU sticks out from CPK in both our Zacks Rank and Style Scores models, so value investors will likely feel that MDU is the better option right now.