MGE Energy (NASDAQ: MGEE) and Pinnacle West Capital Corporation (NYSE:PNW) are both mid-cap utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, institutional ownership, analyst recommendations and risk.

Dividends

MGE Energy pays an annual dividend of $1.29 per share and has a dividend yield of 1.9%. Pinnacle West Capital Corporation pays an annual dividend of $2.62 per share and has a dividend yield of 3.0%. MGE Energy pays out 57.8% of its earnings in the form of a dividend. Pinnacle West Capital Corporation pays out 58.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. MGE Energy has raised its dividend for 41 consecutive years and Pinnacle West Capital Corporation has raised its dividend for 5 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings and price targets for MGE Energy and Pinnacle West Capital Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MGE Energy 0 0 0 0 N/A
Pinnacle West Capital Corporation 1 9 0 0 1.90

Pinnacle West Capital Corporation has a consensus target price of $84.00, indicating a potential downside of 5.38%. Given Pinnacle West Capital Corporation’s higher possible upside, analysts clearly believe Pinnacle West Capital Corporation is more favorable than MGE Energy.

Profitability

This table compares MGE Energy and Pinnacle West Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MGE Energy 13.82% 10.60% 4.33%
Pinnacle West Capital Corporation 14.37% 10.20% 3.14%

Valuation and Earnings

This table compares MGE Energy and Pinnacle West Capital Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
MGE Energy $558.93 million 4.19 $178.68 million $2.23 30.29
Pinnacle West Capital Corporation $3.53 billion 2.81 $1.53 billion $4.52 19.64

Pinnacle West Capital Corporation has higher revenue and earnings than MGE Energy. Pinnacle West Capital Corporation is trading at a lower price-to-earnings ratio than MGE Energy, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

MGE Energy has a beta of 0.34, indicating that its share price is 66% less volatile than the S&P 500. Comparatively, Pinnacle West Capital Corporation has a beta of 0.36, indicating that its share price is 64% less volatile than the S&P 500.

Insider & Institutional Ownership

37.3% of MGE Energy shares are owned by institutional investors. Comparatively, 84.2% of Pinnacle West Capital Corporation shares are owned by institutional investors. 0.2% of MGE Energy shares are owned by company insiders. Comparatively, 0.7% of Pinnacle West Capital Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Pinnacle West Capital Corporation beats MGE Energy on 9 of the 15 factors compared between the two stocks.

MGE Energy Company Profile

MGE Energy, Inc. (MGE) is a public utility holding company. The Company operates through five segments: Regulated electric utility operations; Regulated gas utility operations; Nonregulated energy operations; Transmission investments, and All other. The Regulated electric utility operations segment is engaged in generating, purchasing and distributing electricity through Madison Gas and Electric Company (MGE). The Regulated gas utility operations segment is engaged in purchasing and distributing natural gas through MGE. The Nonregulated energy operations segment is engaged in owning and leasing electric generating capacity that assists MGE through MGE Energy’s subsidiaries MGE Power Elm Road, LLC and MGE Power West Campus, LLC. The Transmission investments segment represents its investment in American Transmission Company LLC and ATC Holdco, LLC. The All other segment is engaged in investing and financing in companies and property that relate to the regulated operations.

Pinnacle West Capital Corporation Company Profile

Pinnacle West Capital Corporation is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. It owned and leased 6,236 megawatt (MW) of regulated generation capacity and the Company held a mix of both long-term and short-term purchased power agreements for additional capacity, including agreements for the purchase of renewable energy, as of December 31, 2016. Its subsidiaries include Arizona Public Service Company, which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

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