Is National Fuel Gas Co. (NFG) a Buy?

On the other hand, the American natural gas utilities company Sempra Energy (NYSE:SRE) is trading at a forward P/E (1yr) of 17.29 and has a dividend yield of 3.20%. It has a PEG of 2.62; adding its dividend yield in its PEG gives us a PEGY of 1.87. A mean recommendation of 2.2 on the sell side clearly shows that Sempra is one of the better buys in the gas utilities sector. Using our earnings multiple analysis, we value Sempra at $85.22; therefore, it is undervalued by almost 10%. Adding its dividend yield into this, we get to a total return of 13.20%. The bottom line is that I recommend buying Sempra Energy.

Conclusion

National Fuel Gas Company is all set to increase its production in the coming years, thanks to Line N Project, PAD-M, and the East Coalinga field. Furthermore, the company has plans of reactivating various idle wells in California in the years ahead. In Kansas, the company has further plans for Seneca operated well in the third quarter.

The bottom line is that in order to lower its production costs, National Fuel Gas is investing a lot on more cost efficient projects. In short, the company is expected to grow its operating profits to some degree in 2013 and 2014. However, with low gas prices in the country, generating substantial profits would still be difficult in the coming years. Hence, we remain neutral on National Fuel Gas in the short run.

The article Is This Gas Company a Buy? originally appeared on Fool.com and is written by Waqar Saif.

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