Analyzing Southwest Gas (NYSE:SWX) and RGC Resources (NASDAQ:RGCO)

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

Dividends

Southwest Gas pays an annual dividend of $2.58 per share and has a dividend yield of 2.8%. RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 3.8%. Southwest Gas pays out 62.9% 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. 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.

Volatility and Risk

Southwest Gas has a beta of 0.55, meaning that its stock price is 45% less volatile than the S&P 500. Comparatively, RGC Resources has a beta of 0.51, meaning that its stock price is 49% less volatile than the S&P 500.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southwest Gas	$1.94 billion	3.48	$439.83 million	$4.10	22.71
RGC Resources	$107.14 million	2.24	$13.28 million	$1.34	17.21

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Southwest Gas	17.23%	6.98%	2.72%
RGC Resources	13.05%	11.73%	4.15%

Analyst Ratings

This is a breakdown of current ratings for Southwest Gas and RGC Resources, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southwest Gas	0	0	7	1	3.12
RGC Resources	0	0	2	0	3.00

Southwest Gas currently has a consensus price target of $101.25, suggesting a potential upside of 8.72%. RGC Resources has a consensus price target of $27.00, suggesting a potential upside of 17.07%. Given RGC Resources’ higher probable upside, analysts clearly believe RGC Resources is more favorable than Southwest Gas.

Insider & Institutional Ownership

92.8% of Southwest Gas shares are owned by institutional investors. Comparatively, 35.8% of RGC Resources shares are owned by institutional investors. 0.6% of Southwest Gas shares are owned by company insiders. Comparatively, 7.2% of RGC Resources shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Southwest Gas beats RGC Resources on 12 of the 18 factors compared between the two stocks.

About Southwest Gas

Southwest Gas provides regulated natural gas distribution service to homes and businesses in the southwestern United States. Its utility operations include delivering natural gas through local pipeline networks and maintaining the infrastructure needed to serve customers. The company serves customers in Arizona and Nevada, as well as parts of California. Its service area includes major metropolitan regions and smaller communities across these states. Southwest Gas traces its history to 1931 and is headquartered in Las Vegas, Nevada.

About RGC Resources

RGC Resources, Inc. is a holding company whose principal subsidiary, Roanoke Gas Company, provides natural gas distribution services. Roanoke Gas delivers natural gas to residential, commercial, and industrial customers through a regulated utility network. The company serves customers in and around Roanoke, Virginia, including communities in the Roanoke Valley and surrounding areas. Its operations include the distribution, sale, and related service of natural gas, as well as the maintenance and expansion of the infrastructure used to deliver it.