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UGI vs. NJR: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2-min read

Investors with an interest in Utility - Gas Distribution stocks have likely encountered both UGI (UGI) and New Jersey Resources (NJR). 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.

UGI and New Jersey Resources are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.

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The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

UGI currently has a forward P/E ratio of 15.45, while NJR has a forward P/E of 20.36. We also note that UGI has a PEG ratio of 1.93. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NJR currently has a PEG ratio of 2.87.

Another notable valuation metric for UGI is its P/B ratio of 2. 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, NJR has a P/B of 2.23.

These metrics, and several others, help UGI earn a Value grade of B, while NJR has been given a Value grade of C.

Both UGI and NJR 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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UGI Corporation (UGI) : Free Stock Analysis Report
 
NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research