The average target price of RGCO is 27 and suggests 24% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 27.0. This translates into 24% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 27.0. This suggests 24% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

RGC Resources, Inc., through its subsidiaries, operates as an energy services company. It sells and distributes natural gas to residential, commercial, and industrial customers in Roanoke, Virginia, and the surrounding localities. The company also provides various unregulated services. It operates approximately 1,157 miles of transmission and distribution pipeline; and a liquefied natural gas storage facility, as well as owns and operates 6 metering stations. RGC Resources, Inc. was founded in 1883 and is based in Roanoke, Virginia.

RGC Resources, Inc.

Utilities

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been strong and significantly above its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream. 

RGCO reported revenue of USD 88mn in the last 12 months, down 1% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 11% from FY23 to USD 1.17. Market expects EPS to reach USD 1.14 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 2ppts and its growth decelerated by 9ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 33.8% in the last 12 months, up from 32.9% in FY23. 

Historically, RGCO has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 13.7%, down from 14.7% in FY23. 

RGC Resources, Inc. reported a return on equity (RoE) of 11.2% in the last 12 months, down from 13.2% in FY23. The market consensus projects an RoE of 13.9% in FY24, again ahead of its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 4.6%, below the peers. The consensus estimate for FY24 for RoCE is 8.6%, however, this time ahead of the peers. 

Another important profitability metric, return on assets (RoA), amounted to 3.7% in the last 12 months, a decrease from 4.2% in FY23. The market analysts predict that RoA will be 4.6% in FY24, more robust than its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.3 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RGCO has poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity is relatively stable and is unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, inadequate interest coverage, and an unfavourable capital structure. We note robust profitability, among the positive credit factors. 

In highly turbulent market conditions, RGCO is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, RGCO is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. We would also like to highlight the negligible intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is slightly overvalued relative to its peers. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITD. 

RGC Resources, Inc.

$ 21.79

4

RGC Resources, Inc.

$ 21.79

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 21.79

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