Critical Comparison: RGC Resources (NASDAQ:RGCO) versus Northwest Natural Gas (NYSE:NWN)
by Mitch Edgeman · The Markets DailyRGC Resources (NASDAQ:RGCO – Get Free Report) and Northwest Natural Gas (NYSE:NWN – Get Free Report) are both utilities companies, but which is the better investment? We will compare the two companies based on the strength of their risk, valuation, dividends, analyst recommendations, earnings, profitability and institutional ownership.
Volatility & Risk
RGC Resources has a beta of 0.52, indicating that its stock price is 48% less volatile than the S&P 500. Comparatively, Northwest Natural Gas has a beta of 0.44, indicating that its stock price is 56% less volatile than the S&P 500.
Profitability
This table compares RGC Resources and Northwest Natural Gas’ 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% |
| Northwest Natural Gas | 9.75% | 8.33% | 2.03% |
Valuation and Earnings
This table compares RGC Resources and Northwest Natural Gas”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 | 2.33 | $13.28 million | $1.34 | 15.91 |
| Northwest Natural Gas | $1.29 billion | 1.58 | $113.32 million | $3.00 | 16.16 |
Northwest Natural Gas has higher revenue and earnings than RGC Resources. RGC Resources 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.
Institutional & Insider Ownership
35.8% of RGC Resources shares are held by institutional investors. Comparatively, 75.1% of Northwest Natural Gas shares are held by institutional investors. 7.2% of RGC Resources shares are held by company insiders. Comparatively, 0.5% of Northwest Natural Gas shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Dividends
RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 4.1%. Northwest Natural Gas pays an annual dividend of $1.97 per share and has a dividend yield of 4.1%. RGC Resources pays out 64.9% of its earnings in the form of a dividend. Northwest Natural Gas pays out 65.7% 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 22 consecutive years and Northwest Natural Gas has increased its dividend for 70 consecutive years. RGC Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a summary of current recommendations for RGC Resources and Northwest Natural Gas, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| RGC Resources | 0 | 0 | 1 | 0 | 3.00 |
| Northwest Natural Gas | 0 | 2 | 3 | 1 | 2.83 |
Northwest Natural Gas has a consensus target price of $55.25, suggesting a potential upside of 13.99%. Given Northwest Natural Gas’ higher possible upside, analysts clearly believe Northwest Natural Gas is more favorable than RGC Resources.
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 Northwest Natural Gas
Northwest Natural Holding Company, through its subsidiary, Northwest Natural Gas Company, provides regulated natural gas distribution services to residential, commercial, and industrial customers in the United States. The company operates a mist gas storage facility contracted to other utilities, third-party marketers, and electric generators; offers natural gas asset management services; and operates an appliance retail center. It also engages in gas storage, water and wastewater, non-regulated renewable natural gas, and other investment businesses. In addition, the company provides natural gas service in Oregon and southwest Washington; and water and wastewater connections. Northwest Natural Holding Company was founded in 1859 and is headquartered in Portland, Oregon.