Contrasting UGI (NYSE:UGI) and RGC Resources (NASDAQ:RGCO)

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

Profitability

This table compares RGC Resources and UGI’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%
UGI	9.20%	12.80%	4.15%

Institutional and Insider Ownership

35.8% of RGC Resources shares are owned by institutional investors. Comparatively, 82.3% of UGI shares are owned by institutional investors. 7.2% of RGC Resources shares are owned by insiders. Comparatively, 0.6% of UGI shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares RGC Resources and UGI”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RGC Resources	$107.14 million	2.32	$13.28 million	$1.34	17.80
UGI	$7.30 billion	1.10	$678.00 million	$2.99	12.53

UGI has higher revenue and earnings than RGC Resources. UGI 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 current ratings and recommmendations for RGC Resources and UGI, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RGC Resources	0	0	2	0	3.00
UGI	0	2	5	1	2.88

RGC Resources currently has a consensus price target of $27.00, indicating a potential upside of 13.21%. UGI has a consensus price target of $45.80, indicating a potential upside of 22.30%. Given UGI’s higher possible upside, analysts plainly believe UGI is more favorable than RGC Resources.

Dividends

RGC Resources pays an annual dividend of $0.87 per share and has a dividend yield of 3.6%. UGI pays an annual dividend of $1.50 per share and has a dividend yield of 4.0%. RGC Resources pays out 64.9% of its earnings in the form of a dividend. UGI pays out 50.2% 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 UGI has increased its dividend for 37 consecutive years. UGI is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

RGC Resources has a beta of 0.51, indicating that its share price is 49% less volatile than the S&P 500. Comparatively, UGI has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Summary

UGI beats RGC Resources on 12 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 UGI

UGI Corporation, together with its subsidiaries, distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities. It distributes propane to approximately 1.3 million residential, commercial/industrial, motor fuel, agricultural, and wholesale customers through 1,400 propane distribution locations. The company distributes liquefied petroleum gases (LPG) to residential, commercial, industrial, agricultural, wholesale and automobile fuel customers; and provides logistics, storage, and other services to third-party LPG distributors. In addition, it engages in the retail sale of natural gas, liquid fuels, and electricity to approximately 12,400 residential, commercial, and industrial customers at 42,000 locations. Further, the company distributes natural gas to approximately 677,000 customers in eastern and central Pennsylvania counties through its distribution system of approximately 12,500 miles of gas mains; and supplies electricity to approximately 62,600 customers in northeastern Pennsylvania through 2,560 miles of lines and 14 substations. Additionally, it operates electric generation facilities, which include coal-fired, landfill gas-fueled, solar-powered, and natural gas-fueled facilities; a natural gas liquefaction, storage, and vaporization facility; propane storage and propane-air mixing stations; and rail transshipment terminals. It manages natural gas pipeline and storage contracts; develops, owns, and operates pipelines, gathering infrastructure, and gas storage facilities. UGI Corporation was incorporated in 1882 and is headquartered in King of Prussia, Pennsylvania.