UGI vs. ATO: Which Stock Is the Better Value Option?

Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either UGI (UGI) or Atmos Energy (ATO). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Both UGI and Atmos Energy have a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle 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.

UGI currently has a forward P/E ratio of 10.39, while ATO has a forward P/E of 22.23. We also note that UGI has a PEG ratio of 1.55. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ATO currently has a PEG ratio of 3.04.

Another notable valuation metric for UGI is its P/B ratio of 1.44. 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 1.93.

These metrics, and several others, help UGI earn a Value grade of A, while ATO has been given a Value grade of D.

Both UGI and ATO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that UGI is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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