Northwest Natural Gas (NYSE: NWN) and Vectren Corporation (NYSE:VVC) are both utilities companies, but which is the better business? We will compare the two companies based on the strength of their earnings, valuation, risk, institutional ownership, dividends, profitability and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Northwest Natural Gas and Vectren Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northwest Natural Gas 0 2 1 0 2.33
Vectren Corporation 0 0 3 0 3.00

Northwest Natural Gas currently has a consensus target price of $75.00, indicating a potential upside of 12.82%. Vectren Corporation has a consensus target price of $66.00, indicating a potential downside of 1.03%. Given Northwest Natural Gas’ higher probable upside, equities research analysts clearly believe Northwest Natural Gas is more favorable than Vectren Corporation.

Profitability

This table compares Northwest Natural Gas and Vectren Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northwest Natural Gas 8.38% 7.51% 2.08%
Vectren Corporation 8.66% 12.65% 3.90%

Institutional & Insider Ownership

63.5% of Northwest Natural Gas shares are owned by institutional investors. Comparatively, 63.8% of Vectren Corporation shares are owned by institutional investors. 1.5% of Northwest Natural Gas shares are owned by insiders. Comparatively, 0.1% of Vectren Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

Northwest Natural Gas pays an annual dividend of $1.88 per share and has a dividend yield of 2.8%. Vectren Corporation pays an annual dividend of $1.68 per share and has a dividend yield of 2.5%. Northwest Natural Gas pays out 85.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Vectren Corporation pays out 62.2% of its earnings in the form of a dividend. Northwest Natural Gas has increased its dividend for 61 consecutive years and Vectren Corporation has increased its dividend for 57 consecutive years. Northwest Natural Gas is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Northwest Natural Gas has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500. Comparatively, Vectren Corporation has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Valuation & Earnings

This table compares Northwest Natural Gas and Vectren Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Northwest Natural Gas $754.82 million 2.52 $257.76 million $2.21 30.08
Vectren Corporation $2.59 billion 2.14 $668.60 million $2.70 24.70

Vectren Corporation has higher revenue and earnings than Northwest Natural Gas. Vectren Corporation is trading at a lower price-to-earnings ratio than Northwest Natural Gas, indicating that it is currently the more affordable of the two stocks.

Summary

Vectren Corporation beats Northwest Natural Gas on 11 of the 17 factors compared between the two stocks.

Northwest Natural Gas Company Profile

Northwest Natural Gas Company (NW Natural) is engaged in the distribution of natural gas. The Company’s segments include Local Gas Distribution, Gas Storage and other. The Company maintains operations in Oregon, Washington and California and conducts businesses through NW Natural and its subsidiaries. The local gas distribution business, referred to as the utility segment, serves residential, commercial, and industrial customers in Oregon and southwest Washington. The Company’s gas storage business, referred to as the gas storage segment, provides storage services for utilities, gas marketers, electric generators and industrial users from storage facilities located in Oregon and California. The Company’s other segment is referred to as non-utility and consists of non-utility investments and other business activities. The other segment consists of an equity method investment in Trail West Holdings, LLC (TWH) and other pipeline assets in NNG Financial Corporation.

Vectren Corporation Company Profile

Vectren Corporation (Vectren) is an energy holding company. The Company segregates its operations into groups, including the Utility Group, the Nonutility Group, and Corporate and Other. The Company’s subsidiary, Vectren Utility Holdings, Inc. (Utility Holdings or VUHI), serves as the intermediate holding company for three public utilities: Indiana Gas Company, Inc. (Indiana Gas), Southern Indiana Gas and Electric Company (SIGECO) and Vectren Energy Delivery of Ohio, Inc. (VEDO). The Company, through Vectren Enterprises Inc. (Enterprises), is involved in non-utility activities in two primary business areas: Infrastructure Services and Energy Services. Infrastructure Services provides underground pipeline construction and repair services. Energy Services provides energy performance contracting and sustainable infrastructure, such as renewables, distributed generation, and combined heat and power projects.

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