Critical Review: Atmos Energy (NYSE:ATO) vs. RGC Resources (NASDAQ:RGCO)

RGC Resources (NASDAQ:RGCO) and Atmos Energy (NYSE:ATO) are both utilities companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Analyst Recommendations

This is a summary of current ratings and target prices for RGC Resources and Atmos Energy, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RGC Resources	0	0	1	0	3.00
Atmos Energy	0	9	4	0	2.31

Atmos Energy has a consensus price target of $187.73, suggesting a potential upside of 12.03%. Given Atmos Energy’s higher possible upside, analysts clearly believe Atmos Energy is more favorable than RGC Resources.

Dividends

RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 4.0%. Atmos Energy pays an annual dividend of $4.00 per share and has a dividend yield of 2.4%. RGC Resources pays out 64.9% of its earnings in the form of a dividend. Atmos Energy pays out 47.6% 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 raised its dividend for 22 consecutive years and Atmos Energy has raised its dividend for 41 consecutive years.

Risk and Volatility

RGC Resources has a beta of 0.51, indicating that its stock price is 49% less volatile than the S&P 500. Comparatively, Atmos Energy has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500.

Valuation and Earnings

This table compares RGC Resources and Atmos Energy”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RGC Resources	$95.33 million	2.40	$13.28 million	$1.34	16.37
Atmos Energy	$4.70 billion	6.02	$1.20 billion	$8.41	19.93

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

Profitability

This table compares RGC Resources and Atmos Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RGC Resources	13.05%	11.73%	4.15%
Atmos Energy	28.50%	9.67%	4.67%

Institutional & Insider Ownership

35.8% of RGC Resources shares are held by institutional investors. Comparatively, 90.2% of Atmos Energy shares are held by institutional investors. 7.2% of RGC Resources shares are held by insiders. Comparatively, 0.4% of Atmos Energy shares are held by 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

Atmos Energy beats RGC Resources on 13 of the 17 factors compared between the two stocks.

About RGC Resources

RGC Resources, Inc., through its subsidiaries, operates as an energy services company. It sells and distributes natural gas to residential, commercial, and industrial customers in Roanoke, Virginia, and the surrounding localities. The company also provides various unregulated services. It operates approximately 1,179 miles of transmission and distribution pipeline; and a liquefied natural gas storage facility, as well as owns and operates six metering stations. In addition, it produces biogas. RGC Resources, Inc. was founded in 1883 and is based in Roanoke, Virginia.

About Atmos Energy

Atmos Energy Corporation, together with its subsidiaries, engages in the regulated natural gas distribution, and pipeline and storage businesses in the United States. It operates through two segments, Distribution, and Pipeline and Storage. The Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately 3.3 million residential, commercial, public authority, and industrial customers; and owned 73,689 miles of underground distribution and transmission mains. The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage facilities in Texas; provides ancillary services customary to the pipeline industry, including parking arrangements, lending, and inventory sales; and owned 5,645 miles of gas transmission lines. Atmos Energy Corporation was founded in 1906 and is headquartered in Dallas, Texas.