Analyzing RGC Resources (NASDAQ:RGCO) & ONE Gas (NYSE:OGS)

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for ONE Gas and RGC Resources, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ONE Gas	0	6	7	0	2.54
RGC Resources	0	0	2	0	3.00

ONE Gas presently has a consensus price target of $87.12, suggesting a potential upside of 5.36%. RGC Resources has a consensus price target of $27.00, suggesting a potential upside of 20.21%. Given RGC Resources’ stronger consensus rating and higher possible upside, analysts clearly believe RGC Resources is more favorable than ONE Gas.

Volatility & Risk

ONE Gas has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, RGC Resources has a beta of 0.51, suggesting that its stock price is 49% less volatile than the S&P 500.

Valuation & Earnings

This table compares ONE Gas and RGC Resources”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ONE Gas	$2.43 billion	2.14	$264.22 million	$4.69	17.63
RGC Resources	$95.33 million	2.45	$13.28 million	$1.34	16.76

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

Institutional and Insider Ownership

88.7% of ONE Gas shares are owned by institutional investors. Comparatively, 35.8% of RGC Resources shares are owned by institutional investors. 0.9% of ONE Gas shares are owned by insiders. Comparatively, 7.2% of RGC Resources shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ONE Gas	12.61%	8.80%	3.48%
RGC Resources	13.05%	11.73%	4.15%

Dividends

ONE Gas pays an annual dividend of $2.72 per share and has a dividend yield of 3.3%. RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 3.9%. ONE Gas pays out 58.0% of its earnings in the form of a dividend. RGC Resources pays out 64.9% 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. ONE Gas has increased its dividend for 2 consecutive years and RGC Resources has increased its dividend for 22 consecutive years. RGC Resources is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

RGC Resources beats ONE Gas on 9 of the 17 factors compared between the two stocks.

About ONE Gas

ONE Gas, Inc. is a regulated natural gas distribution company that delivers natural gas to residential, commercial and industrial customers. Its operations serve communities in Oklahoma, Kansas and Texas. The company operates through three utility divisions: Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service. Its services include distributing natural gas through local pipeline systems and maintaining the infrastructure used to provide that service. ONE Gas became an independent, publicly traded company in 2014 after separating from ONEOK, Inc. Its business is focused on natural gas distribution rather than exploration or production.

About RGC Resources

RGC Resources, Inc. is a holding company whose principal operating subsidiary, Roanoke Gas Company, distributes natural gas to residential, commercial and industrial customers in Roanoke and surrounding communities in southwestern Virginia. Roanoke Gas traces its roots to 1883. Its services include natural gas delivery and related customer programs, such as energy-efficiency assistance. Through subsidiaries, RGC Resources also has interests in natural gas infrastructure, including the Mountain Valley Pipeline.