Head-To-Head Comparison: RGC Resources (RGCO) versus Southern Company Gas (GAS)

Southern Company Gas (NYSE: GAS) and RGC Resources (NASDAQ:RGCO) are both utilities companies, but which is the better business? We will compare the two companies based on the strength of their valuation, earnings, institutional ownership, profitability, dividends, risk and analyst recommendations.

Dividends

Southern Company Gas pays an annual dividend of $2.12 per share and has a dividend yield of 3.2%. RGC Resources pays an annual dividend of $0.62 per share and has a dividend yield of 2.7%. Southern Company Gas pays out 74.6% of its earnings in the form of a dividend. RGC Resources pays out 74.7% 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. RGC Resources has increased its dividend for 6 consecutive years. Southern Company Gas is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Southern Company Gas and RGC Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southern Company Gas 2.65% 0.65% 0.27%
RGC Resources 9.73% 9.69% 3.23%

Valuation & Earnings

This table compares Southern Company Gas and RGC Resources’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Southern Company Gas N/A N/A N/A $2.84 23.23
RGC Resources $62.30 million 2.70 $6.23 million $0.83 27.96

RGC Resources has higher revenue and earnings than Southern Company Gas. Southern Company Gas is trading at a lower price-to-earnings ratio than RGC Resources, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Southern Company Gas and RGC Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southern Company Gas 0 0 0 0 N/A
RGC Resources 0 0 1 0 3.00

RGC Resources has a consensus price target of $27.00, indicating a potential upside of 16.33%. Given RGC Resources’ higher probable upside, analysts clearly believe RGC Resources is more favorable than Southern Company Gas.

Risk & Volatility

Southern Company Gas has a beta of -0.08, suggesting that its share price is 108% less volatile than the S&P 500. Comparatively, RGC Resources has a beta of -0.02, suggesting that its share price is 102% less volatile than the S&P 500.

Summary

RGC Resources beats Southern Company Gas on 9 of the 12 factors compared between the two stocks.

Southern Company Gas Company Profile

Southern Company Gas, formerly AGL Resources Inc, is a natural gas-only distribution company. The Company operates in four operating segments: distribution operations, retail operations, wholesale services and midstream operations. The Company’s distribution operations segment is engaged in providing natural gas to residential, commercial and industrial customers. The retail operations segment is involved in the provision of natural gas commodity and related services. The wholesale services segment is engaged in natural gas storage, gas pipeline arbitrage and provides natural gas asset management and related logistics services for its utilities, as well as for non-affiliated companies. Midstream operations segment consists primarily of natural gas storage facilities and select pipelines, enabling the provision of diverse sources of natural gas supplies to its customers.

RGC Resources Company Profile

RGC Resources, Inc. (Resources) is an energy services company. The Company is engaged in the regulated sale and distribution of natural gas to residential, commercial and industrial customers in Roanoke, Virginia, and the surrounding localities, through its Roanoke Gas Company (Roanoke Gas) subsidiary. Roanoke Gas also provides certain non-regulated services. It maintains an integrated natural gas distribution system to deliver natural gas purchased from suppliers to residential, commercial and industrial users in its service territory. As of September 30, 2016, Resources had approximately 1,132 miles of transmission and distribution pipeline. As of September 30, 2016, Roanoke Gas owned and operated eight metering stations. It also owns a liquefied natural gas storage facility located in Botetourt County that has the capacity to store up to 220,000 dekatherm (DTH) of natural gas. The Company’s subsidiaries also include Diversified Energy Company and RGC Midstream, LLC.

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