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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, MDU Resources has a Zacks Rank of #1 (Strong Buy), while Atmos Energy has a Zacks Rank of #2 (Buy). 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 analyze a variety of traditional, tried-and-true metrics to help find companies 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.
MDU currently has a forward P/E ratio of 8.87, while ATO has a forward P/E of 22.53. We also note that MDU has a PEG ratio of 1.48. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ATO currently has a PEG ratio of 3.15.
Another notable valuation metric for MDU is its P/B ratio of 1.09. 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 2.11.
Based on these metrics and many more, MDU holds a Value grade of B, while ATO has a Value grade of D.
MDU 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 MDU is likely the superior value option right now.