Southwest Gas Holdings

Southwest Gas Holdings Inc receives a 4-star quantitative star rating, illustrating our stance that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 8% discount to our quantitative fair value estimate of $90.42 per share, which is reinforced by this estimate's low uncertainty rating.

The company's valuation metrics bolster our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its book value yield of 68.9%, which ranks in the top 45% globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are undervalued.

Conversely, the company's lack of growth is potentially concerning. Stagnant revenue and earnings growth indicates a company's challenges in increasing market share and profitability. The firm's revenue 5-year growth of -11.2%, for example, sits in the bottom 10% compared with peers globally. Weak trailing five-year revenue growth is disappointing and could indicate trouble generating future value for shareholders, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. Its moat is bolstered by its strong financial health, which indicates low near-term bankruptcy risk.