Critical Comparison: Northwest Natural Gas (NWN) vs. Questar (STR)

Northwest Natural Gas (NYSE: NWN) and Questar (NYSE:STR) are both utilities companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Insider & Institutional Ownership

63.6% of Northwest Natural Gas shares are owned by institutional investors. Comparatively, 78.9% of Questar shares are owned by institutional investors. 1.5% of Northwest Natural Gas shares are owned by company insiders. Comparatively, 0.4% of Questar shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

Northwest Natural Gas pays an annual dividend of $1.88 per share and has a dividend yield of 2.9%. Questar pays an annual dividend of $0.88 per share and has a dividend yield of 3.5%. Northwest Natural Gas pays out 85.1% 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. Northwest Natural Gas has increased its dividend for 37 consecutive years and Questar has increased its dividend for 61 consecutive years. Questar is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Northwest Natural Gas $754.82 million 2.43 $257.76 million $2.21 29.00
Questar N/A N/A N/A $1.11 22.58

Northwest Natural Gas has higher revenue and earnings than Questar. Questar 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.

Risk & Volatility

Northwest Natural Gas has a beta of 0.43, meaning that its share price is 57% less volatile than the S&P 500. Comparatively, Questar has a beta of 0.51, meaning that its share price is 49% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Northwest Natural Gas and Questar, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northwest Natural Gas 0 2 1 0 2.33
Questar 0 1 0 0 2.00

Northwest Natural Gas currently has a consensus price target of $75.00, suggesting a potential upside of 17.00%. Questar has a consensus price target of $25.00, suggesting a potential downside of 0.24%. Given Northwest Natural Gas’ stronger consensus rating and higher possible upside, research analysts clearly believe Northwest Natural Gas is more favorable than Questar.

Profitability

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

Net Margins Return on Equity Return on Assets
Northwest Natural Gas 8.38% 7.51% 2.08%
Questar 19.01% 9.76% 3.19%

Summary

Questar beats Northwest Natural Gas on 8 of the 14 factors compared between the two stocks.

About Northwest Natural Gas

Northwest Natural Gas Company (NW Natural) is engaged in the distribution of natural gas. The Company’s segments include Local Gas Distribution, Gas Storage and other. The Company maintains operations in Oregon, Washington and California and conducts businesses through NW Natural and its subsidiaries. The local gas distribution business, referred to as the utility segment, serves residential, commercial, and industrial customers in Oregon and southwest Washington. The Company’s gas storage business, referred to as the gas storage segment, provides storage services for utilities, gas marketers, electric generators and industrial users from storage facilities located in Oregon and California. The Company’s other segment is referred to as non-utility and consists of non-utility investments and other business activities. The other segment consists of an equity method investment in Trail West Holdings, LLC (TWH) and other pipeline assets in NNG Financial Corporation.

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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