Critical Review: Delta Natural Gas (DGAS) versus Chesapeake Utilities Corporation (NYSE:CPK)

Delta Natural Gas (NASDAQ: DGAS) and Chesapeake Utilities Corporation (NYSE:CPK) are both small-cap utilities companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, dividends, profitabiliy, earnings, analyst recommendations, valuation and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Delta Natural Gas and Chesapeake Utilities Corporation, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Delta Natural Gas	0	0	0	0	N/A
Chesapeake Utilities Corporation	0	4	1	0	2.20

Chesapeake Utilities Corporation has a consensus price target of $69.50, suggesting a potential downside of 10.26%. Given Chesapeake Utilities Corporation’s higher possible upside, analysts plainly believe Chesapeake Utilities Corporation is more favorable than Delta Natural Gas.

Valuation and Earnings

This table compares Delta Natural Gas and Chesapeake Utilities Corporation’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Delta Natural Gas	$67.09 million	3.23	$20.21 million	$0.89	34.18
Chesapeake Utilities Corporation	$537.72 million	2.35	$123.36 million	$2.71	28.58

Chesapeake Utilities Corporation has higher revenue and earnings than Delta Natural Gas. Chesapeake Utilities Corporation is trading at a lower price-to-earnings ratio than Delta Natural Gas, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

36.0% of Delta Natural Gas shares are owned by institutional investors. Comparatively, 60.0% of Chesapeake Utilities Corporation shares are owned by institutional investors. 4.2% of Delta Natural Gas shares are owned by insiders. Comparatively, 5.4% of Chesapeake Utilities Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Delta Natural Gas pays an annual dividend of $0.83 per share and has a dividend yield of 2.7%. Chesapeake Utilities Corporation pays an annual dividend of $1.30 per share and has a dividend yield of 1.7%. Delta Natural Gas pays out 93.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chesapeake Utilities Corporation pays out 48.0% of its earnings in the form of a dividend. Delta Natural Gas has raised its dividend for 13 consecutive years. Delta Natural Gas is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Delta Natural Gas has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500. Comparatively, Chesapeake Utilities Corporation has a beta of 0.27, meaning that its share price is 73% less volatile than the S&P 500.

Profitability

This table compares Delta Natural Gas and Chesapeake Utilities Corporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Delta Natural Gas	9.35%	8.08%	3.31%
Chesapeake Utilities Corporation	8.08%	10.08%	3.69%

Summary

Chesapeake Utilities Corporation beats Delta Natural Gas on 10 of the 16 factors compared between the two stocks.

Delta Natural Gas Company Profile

Delta Natural Gas Company, Inc. distributes or transports natural gas to approximately 36,000 customers. The Company’s segments include regulated segment and non-regulated segment. Through regulated segment, the Company distributes natural gas to its retail customers in approximately 23 rural counties. Its three service areas are Nicholasville, Corbin and Berea, Kentucky. The non-regulated segment includes the Company’s three subsidiaries, Delta Resources, Inc. and Delgasco, Inc. (Delgasco), which purchase natural gas in the open market, including natural gas from Kentucky producers, and Enpro, Inc. (Enpro), which produces natural gas that is sold to Delgasco for resale in the open market. The Company owns approximately 2,600 miles of natural gas gathering, transmission, distribution and storage lines. These lines range in size over 12 inches in diameter. It also holds leases for the storage of natural gas under approximately 8,000 acres located in Bell County, Kentucky.

Chesapeake Utilities Corporation Company Profile

Chesapeake Utilities Corporation (Chesapeake) is an energy company. The Company operates through two segments: Regulated Energy and Unregulated Energy. The Company provides natural gas distribution and transmission; natural gas supply, gathering, processing and marketing; electric distribution and generation; propane distribution; propane and crude oil wholesale marketing; steam generation, and other energy-related services. The Regulated Energy segment includes the Company’s natural gas distribution, natural gas transmission and electric distribution operations. The Unregulated Energy segment includes its propane distribution, propane and crude oil wholesale marketing, natural gas marketing and unregulated natural gas supply, gathering and processing, electricity and steam generation and other unregulated energy-related services to customers.