RGC Resources ( RGCO ) received an investment-rating downgrade Thursday to neutral from buy from Janney Montgomery Scott, which cited valuation after the energy company's shares exceeded the firm's fair-value estimate for them.
Janney's price target on RGC's shares is $28 per share, which the firm maintained. The shares closed Wednesday's session at $28.55 and are up 7.9% from a week ago.
In a note to clients, Janney said "with the shares of RGC Resources now trading solidly above our fair-value estimate of $28, we downgrade our rating from buy to neutral based on valuation." It noted that in its peer group of primarily gas utilities, RGC Resources shares are now the most expensive on a price-to-earnings basis using Janney's estimates for fiscal 2019.
Still, the firm added, "we remain bullish on the company's future prospects, and can envision a scenario whereby the shares slowly move higher from current levels."
Janney also said it is "comfortable recommending investors hold current positions; we just wouldn't add (at this time). We'll patiently wait for the next opportunity to revisit our rating with a positive when valuation is more compelling."
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