Investors interested in Utility - Gas Distribution stocks are likely familiar with New Jersey Resources (NJR - Free Report) and ONE Gas (OGS - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, New Jersey Resources has a Zacks Rank of #2 (Buy), while ONE Gas has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NJR is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 16.06, while OGS has a forward P/E of 21.99. We also note that NJR has a PEG ratio of 2.68. 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. OGS currently has a PEG ratio of 4.
Another notable valuation metric for NJR is its P/B ratio of 1.71. 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, OGS has a P/B of 1.89.
These metrics, and several others, help NJR earn a Value grade of B, while OGS has been given a Value grade of C.
NJR stands above OGS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NJR is the superior value option right now.