Investors looking for stocks in the Utility - Gas Distribution sector might want to consider either Spire (SR) or Atmos Energy (ATO). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Spire has a Zacks Rank of #2 (Buy), while Atmos Energy has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SR is likely seeing its earnings outlook improve to a greater extent. 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.
SR currently has a forward P/E ratio of 15.89, while ATO has a forward P/E of 20.57. We also note that SR has a PEG ratio of 1.51. 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. ATO currently has a PEG ratio of 3.17.
Another notable valuation metric for SR is its P/B ratio of 1.58. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ATO has a P/B of 1.96.
These are just a few of the metrics contributing to SR's Value grade of B and ATO's Value grade of D.
SR stands above ATO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SR is the superior value option right now.
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Spire Inc. (SR): Free Stock Analysis Report Atmos Energy Corporation (ATO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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