RGC Resources, Inc. (RGCO) | Investment Case

1. Company Snapshot

1.a. Company Description

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.

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1.b. Last Insights on RGCO

RGC Resources' recent performance was driven by a series of positive developments. The company's upcoming third quarter earnings call, scheduled for August 13, 2025, indicates a focus on transparency and investor engagement. Additionally, the recent 38-for-1 stock split has sparked investor interest, with shares of Regencell Bioscience, a Hong Kong-based developer of traditional Chinese herbal treatments, more than tripling in value. Furthermore, RGC Resources' solid net profit margins, rising earnings, and bullish analyst ratings suggest a strong financial foundation.

1.c. Company Highlights

Last Price	22.03
Change Percentage	-0.41%
Open	22.07
Previous Close	22.12
Market Cap ( Millions)	227
Volume	4484
Year High	23.82
Year Low	19.06
M A 50	21.65
M A 200	21.43

FCF Yield	3.25%
Dividend Yield	3.77%
ROE	11.56%
Debt / Equity	128.37%
Net Debt / EBIDTA	448.18%
Price To Book	2.0
Price Earnings Ratio	17.14
Price To FCF	30.8
Price To sales	2.39
EV / EBITDA	11.48

2. RGC Resources Delivers Strong Q2 Performance with Robust Growth Across Sectors

RGC Resources reported a stellar second quarter, with net income surging 17% year-over-year to $7.7 million, or $0.74 per share, surpassing analyst estimates of $0.68. This strong financial performance was driven by a 20% increase in gas volumes, attributed to higher industrial demand and colder weather. Paul Nestor, CEO, highlighted the company's resilience, drawing parallels to its performance during the 2020 COVID year, underscoring its ability to thrive amidst macroeconomic challenges.

Publication Date: May -10

                                    📋 Highlights
                                    Operational Highlights:
                                                Installed 2.7 main miles and connected 359 new services, demonstrating strong infrastructure investment.
Gas Volumes Growth:
                                                Q2 volumes rose 20% year-over-year, driven by industrial demand and colder weather.
Regulatory Revenue Boost:
                                                Final rate case yielded a $4 million annual revenue increase with a 9.9% ROE.
Capital Expenditures:
                                                $10.7 million spent in H1, down 5% year-over-year due to weather and project delays.
Financial Performance:
                                                Q2 net income reached $7.7 million, up 17% from Q2 2024, with year-to-date net income at $12.9 million.

                                

Operational Excellence and Strategic Investments

The company demonstrated continued commitment to infrastructure growth, installing 2.7 main miles in the first half of FY2025, exceeding the total for FY2024. This expansion, along with 359 new service connections, reflects RGC's focus on enhancing system reliability and meeting growing customer demand across residential, commercial, and industrial sectors.

Regulatory Environment and Revenue Growth

A favorable regulatory outcome from the 2024 rate case yielded a $4 million annual revenue increase, supported by a 9.9% ROE. This approval underscores the constructive regulatory landscape, providing a stable foundation for sustained growth and investment in regional infrastructure.

Balance Sheet Resilience and Prudent Capital Management

RGC maintained a strong balance sheet, renewing its credit line to $30 million and managing debt effectively. Despite a 5% decrease in capital expenditures due to weather and expansion delays, the company remains on track with its growth strategy, supported by a robust balance sheet and controlled leverage.

Valuation Metrics Highlight Attractive Investment Proposition

Trading at a P/E ratio of 18.61 and a dividend yield of 3.74%, RGC offers a compelling blend of growth and income. The stock's valuation reflects confidence in its ability to execute on growth initiatives while providing attractive returns to shareholders.

Management's Outlook and Future Prospects

Management expressed optimism about regional economic growth, particularly in manufacturing and healthcare, with significant projects like a $400 million hospital expansion. RGC is well-positioned to support this growth, leveraging natural gas's role in attracting industries such as data centers. The company raised its FY2025 EPS guidance to $1.22–$1.27, anticipating a small Q4 net loss due to seasonality but confident in its long-term trajectory.

3. NewsRoom

RGC Resources, Inc. (RGCO) Q4 2025 Earnings Call Transcript

Dec -04

Source: seekingalpha.com

RGC Resources (NASDAQ:RGCO) Stock Passes Above Two Hundred Day Moving Average – Here’s Why

Dec -03

Source: defenseworld.net

RGC Resources, Inc. Raises Annual Dividend to $0.87 Per Share

Nov -24

Source: globenewswire.com

RGC Resources, Inc. Schedules Fourth Quarter 2025 Earnings Call

Nov -20

Source: globenewswire.com

RGC Resources Inc. (RGCO) Reports Q4 Loss, Tops Revenue Estimates

Nov -20

Source: zacks.com

RGC Resources, Inc. Reports 2025 Earnings

Nov -19

Source: globenewswire.com

RGC Resources: MVP Pipeline Ignites A Hidden Growth Opportunity

Nov -06

Source: seekingalpha.com

Mountain Valley Pipeline, LLC Files Formal Application Requesting FERC Authorization to Construct MVP Boost

Oct -23

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.83%)

6. Segments

Gas Utility

Expected Growth: 4.83%

RGC Resources, Inc.'s 4.83% growth in Gas Utility segment is driven by increasing demand for natural gas, expansion of customer base, and investments in infrastructure upgrades. Additionally, favorable weather conditions, economic growth, and regulatory support for gas infrastructure development contribute to the segment's growth.

Parent and Other

Expected Growth: 4.83%

RGC Resources, Inc.'s 4.83% growth in Parent and Other segments is driven by increasing demand for natural gas, strategic acquisitions, and cost savings initiatives. Additionally, favorable weather conditions and a strong economy contribute to the growth. The company's focus on infrastructure development and expansion into new markets also supports the upward trend.

7. Detailed Products

Natural Gas Distribution

RGC Resources, Inc. provides natural gas distribution services to residential, commercial, and industrial customers in Virginia.

Propane Sales

RGC Resources, Inc. offers propane sales and delivery services for residential, commercial, and agricultural customers.

Energy Efficiency Solutions

RGC Resources, Inc. provides energy-efficient solutions, including energy audits, weatherization, and energy-saving products.

Appliance Sales and Service

RGC Resources, Inc. sells and services natural gas and propane-powered appliances, including water heaters, furnaces, and generators.

Pipeline Construction and Maintenance

RGC Resources, Inc. provides pipeline construction, maintenance, and repair services for natural gas infrastructure.

8. RGC Resources, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for RGC Resources, Inc. is medium due to the availability of alternative energy sources and the increasing adoption of renewable energy.

Bargaining Power Of Customers

The bargaining power of customers for RGC Resources, Inc. is low due to the lack of negotiating power and the company's ability to maintain prices.

Bargaining Power Of Suppliers

The bargaining power of suppliers for RGC Resources, Inc. is medium due to the dependence on a few large suppliers and the potential for price increases.

Threat Of New Entrants

The threat of new entrants for RGC Resources, Inc. is low due to the high barriers to entry and the significant capital requirements.

Intensity Of Rivalry

The intensity of rivalry for RGC Resources, Inc. is high due to the competitive nature of the energy industry and the presence of several large competitors.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	58.36%
Debt Cost	4.90%
Equity Weight	41.64%
Equity Cost	4.90%
WACC	4.90%
Leverage	140.15%

11. Quality Control: RGC Resources, Inc. passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Northwest Natural

A-Score: 6.5/10

Value: 6.5

Growth: 3.2

Quality: 4.0

Yield: 8.0

Momentum: 7.0

Volatility: 10.0

1-Year Total Return ->

NiSource

A-Score: 6.3/10

Value: 5.0

Growth: 3.3

Quality: 4.7

Yield: 6.0

Momentum: 8.5

Volatility: 10.0

1-Year Total Return ->

Suburban Propane

A-Score: 6.2/10

Value: 6.4

Growth: 2.4

Quality: 5.1

Yield: 10.0

Momentum: 4.5

Volatility: 8.7

1-Year Total Return ->

Aris Water Solutions

A-Score: 6.0/10

Value: 6.0

Growth: 8.6

Quality: 4.7

Yield: 5.0

Momentum: 8.5

Volatility: 3.3

1-Year Total Return ->

RGC Resources

A-Score: 5.6/10

Value: 4.7

Growth: 3.6

Quality: 4.9

Yield: 8.0

Momentum: 6.5

Volatility: 6.0

1-Year Total Return ->

OPAL Fuels

A-Score: 4.5/10

Value: 9.7

Growth: 8.6

Quality: 5.1

Yield: 0.0

Momentum: 1.0

Volatility: 2.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

25.04%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

4.90%

RGC Resources, Inc. - US74955L1035

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on RGCO

1.c. Company Highlights

Average Yield

Medium Volatility

Average Quality

Earnings Miss

Revenues Beats

Stable Momentum

Strong Momentum

Lower Growth

Earnings Beats

Expensive

Average Growth

Fairly Valued

2. RGC Resources Delivers Strong Q2 Performance with Robust Growth Across Sectors

Operational Excellence and Strategic Investments

Regulatory Environment and Revenue Growth

Balance Sheet Resilience and Prudent Capital Management

Valuation Metrics Highlight Attractive Investment Proposition

Management's Outlook and Future Prospects

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.83%)

6. Segments

Gas Utility

Expected Growth: 4.83%

Parent and Other

Expected Growth: 4.83%

7. Detailed Products

Natural Gas Distribution

Propane Sales

Energy Efficiency Solutions

Appliance Sales and Service

Pipeline Construction and Maintenance

8. RGC Resources, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: RGC Resources, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

22.03$

Current Price

22.03$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA