Head to Head Contrast: 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 investment? We will compare the two businesses based on the strength of their analyst recommendations, risk, dividends, profitability, earnings, institutional ownership and valuation.

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 3.7%. 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.

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%

Volatility & Risk

Southwest Gas has a beta of 0.55, suggesting that its stock price is 45% 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.

Analyst Recommendations

This is a summary of recent 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 target price of $101.25, suggesting a potential upside of 9.22%. RGC Resources has a consensus target price of $27.00, suggesting a potential upside of 14.16%. Given RGC Resources’ higher probable upside, analysts clearly believe RGC Resources is more favorable than Southwest Gas.

Institutional and Insider 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 large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Southwest Gas and RGC Resources”s gross 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	3.46	$439.83 million	$4.10	22.61
RGC Resources	$95.33 million	2.59	$13.28 million	$1.34	17.65

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.

Summary

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

About Southwest Gas

Southwest Gas Holdings, Inc., through its subsidiaries, distributes and transports natural gas in Arizona, Nevada, and California. The company operates through Natural Gas Distribution, Utility Infrastructure Services, and Pipeline and Storage segments. It also provides trenching, installation, and replacement of underground pipes, as well as maintenance services for energy distribution systems. As of December 31, 2023, it had 2,226,000 residential, commercial, industrial, and other natural gas customers. Southwest Gas Holdings, Inc. was incorporated in 1931 and is headquartered in Las Vegas, Nevada.

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.