MDU

We rate MDU RESOURCES GROUP INC (MDU) as a Reduce with a composite score of 46.8/100 at a current price of $20.37. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (95th percentile) and value (42th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (38th percentile) and momentum (39th percentile) tempers our overall conviction. We assign a Narrow Moat rating (45/100), Low uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

MDU RESOURCES GROUP INC holds a top-quartile position (#0 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 46.8/100 places it at rank #2520 in our full 7,333-stock universe. At $3.6B in market capitalization, MDU RESOURCES GROUP INC is a mid-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -70% combined with momentum at the 39th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 68% (+24.8pp vs sector) narrow to operating margins of 12% (-0.6pp vs sector) and net margins of 7.0%, yielding a gross-to-net conversion rate of 10%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $20.37, MDU RESOURCES GROUP INC is trading near fair value based on current fundamentals. Our value factor score of 42/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 24.5x (a 78% premium to the sector median of 13.7x), EV/EBITDA of 25.7x (at a premium), P/B of 1.6x, P/S of 1.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to MDU RESOURCES GROUP INC. The company exhibits strong financial stability with a beta of 0.46, and a stability factor in the 95th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.46 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 95th percentile and quality factor at the 38th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 68% provide a buffer against cost pressures; above-average stability (95th percentile) suggests predictable business dynamics; a 78.07% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate MDU RESOURCES GROUP INC's capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — MDU RESOURCES GROUP INC significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, MDU RESOURCES GROUP INC receives a Reduce rating with a composite score of 46.8/100 (rank #2520 of 7,333). Our quantitative framework assigns a Narrow Moat (45/100, trend: stable), Low uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis does not support a constructive view on MDU RESOURCES GROUP INC at this time. The combination of the current quantitative profile, low uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.