Financial Analysis: Questar (STR) vs. Piedmont Natural Gas (PNY)

Piedmont Natural Gas (NYSE: PNY) and Questar (NYSE:STR) are both utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Analyst Recommendations

This is a summary of current recommendations for Piedmont Natural Gas and Questar, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Piedmont Natural Gas 0 0 0 0 N/A
Questar 0 1 0 0 2.00

Questar has a consensus price target of $25.00, indicating a potential downside of 0.24%. Given Questar’s higher possible upside, analysts clearly believe Questar is more favorable than Piedmont Natural Gas.

Profitability

This table compares Piedmont Natural Gas and Questar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Piedmont Natural Gas 19.00% 22.34% 6.57%
Questar 19.01% 9.76% 3.19%

Insider & Institutional Ownership

61.5% of Piedmont Natural Gas shares are held by institutional investors. Comparatively, 78.9% of Questar shares are held by institutional investors. 1.4% of Piedmont Natural Gas shares are held by company insiders. Comparatively, 0.4% of Questar shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Piedmont Natural Gas and Questar’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Piedmont Natural Gas N/A N/A N/A $1.72 34.90
Questar N/A N/A N/A $1.11 22.58

Questar is trading at a lower price-to-earnings ratio than Piedmont Natural Gas, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Piedmont Natural Gas has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Comparatively, Questar has a beta of 0.51, suggesting that its stock price is 49% less volatile than the S&P 500.

Dividends

Piedmont Natural Gas pays an annual dividend of $1.36 per share and has a dividend yield of 2.3%. Questar pays an annual dividend of $0.88 per share and has a dividend yield of 3.5%. Piedmont Natural Gas pays out 79.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Questar pays out 79.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Piedmont Natural Gas has increased its dividend for 37 consecutive years and Questar has increased its dividend for 38 consecutive years. Questar is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Piedmont Natural Gas beats Questar on 6 of the 11 factors compared between the two stocks.

About Piedmont Natural Gas

Piedmont Natural Gas Company, Inc. is an energy services company. The Company’s principal business is the distribution of natural gas to residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee, including customers served by municipalities, which are its wholesale customers. The Company operates through three segments: regulated utility, regulated non-utility activities and unregulated non-utility activities. The regulated utility segment includes operating a natural gas distribution system. The regulated non-utility activities segment consists of its equity method investments in regulated energy-related joint ventures that are held by its subsidiaries. The unregulated non-utility activities segment consists primarily of its equity method investment in an unregulated energy-related joint venture that is held by its subsidiary.

About Questar

Dominion Questar Corp, formerly Questar Corporation, is an integrated natural gas holding company. The Company, through its subsidiaries is principally engaged in three lines of business, which include Questar Gas Company (Questar Gas), which provides retail natural gas distribution in Utah, Wyoming and Idaho; Wexpro Company (Wexpro), which develops and produces natural gas from cost-of-service reserves for Questar Gas customers, and Questar Pipeline Company, which operates interstate natural gas pipelines and storage facilities in the western the United States and provides other energy services. The Company is also engaged in Corporate and Other operations, which include Questar Fueling Company (Questar Fueling) that builds, owns and operates compressed natural gas (CNG) fueling stations for fleet operators with medium- and heavy-duty trucks and tractors. Questar Gas distributes gas to customers along the Wasatch Front, Provo, Salt Lake, Ogden and other areas in Utah.

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