Atmos Energy Corporation (ATO) Buy or Sell Stock Guide

Last updated: Jun 04, '18

The analysis below may be helpful to you if you have any of the following questions about ATO stock:

  • Is ATO a buy or a sell?
  • Should I sell or hold ATO stock today?
  • Is ATO a good buy / a good investment?
  • What are ATO analyst opinions, recommendations, ratings?

Here are ATO stock buy reasons/signals:

1. Constructive regulatory frameworks allow rates to adjust in six months or less for 95% of capital investments. This reduces regulatory lag and, combined with customer growth, allows Atmos to achieve returns at or above its allowed returns.

2. Atmos' regulated utilities operations are distributed across eight states and several jurisdictions in Texas, insulating profitability from individual negative regulatory decisions.

3. Atmos has increased its dividend for 33 consecutive years, and we forecast 7% annual increases over the next five years.

4. ATO quarterly revenue growth was 14.00%, higher than the industry and sector average revenue growth (9.08% and 5.79%, respectively).

5. ATO profitability is improving. The YoY profit margin change was 3.91pp.

6. ATO forward dividend yield is 2.24%, higher than the industry (1.67%) and sector (1.46%) forward dividend yields.

7. ATO PEG ratio (P/E adjusted for growth) is 3.31, and it’s low compared to its industry peers’ PEG ratios.

8. ATO average analyst rating is Buy.

Here are ATO stock sell reasons/signals:

1. Dividend-paying stocks like Atmos are sensitive to interest rates. As interest rates go up, dividend-paying stocks often underperform the broader market.

2. Current market valuations are historically high for gas utilities, which means Atmos might significantly overpay for any acquisitions, potentially destroying shareholder value.

3. Atmos has been able to increase its capital expenditures without a significant impact on customer rates due to low natural gas prices and customer growth. If customer growth slows and/or natural gas prices increase, Atmos might need to slow its investments.

4. ATO forward P/E ratio is 20.85, and it’s high compared to its industry peers’ P/E ratios.

5. ATO Price/Sales ratio is 3.41, and it’s high compared to its industry peers’ P/S ratios.

What are your thoughts on ATO?

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