Investors interested in stocks from the Utility - Gas Distribution sector have probably already heard of Southwest Gas (SWX - Free Report) and Northwest Natural (NWN - 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Southwest Gas has a Zacks Rank of #2 (Buy), while Northwest Natural has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SWX is likely seeing its earnings outlook improve to a greater extent. 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.
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.
SWX currently has a forward P/E ratio of 17.60, while NWN has a forward P/E of 24.06. We also note that SWX has a PEG ratio of 2.93. 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. NWN currently has a PEG ratio of 7.71.
Another notable valuation metric for SWX is its P/B ratio of 1.43. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NWN has a P/B of 1.86.
These are just a few of the metrics contributing to SWX's Value grade of B and NWN's Value grade of C.
SWX sticks out from NWN in both our Zacks Rank and Style Scores models, so value investors will likely feel that SWX is the better option right now.