Investors interested in Alternative Energy - Other stocks are likely familiar with Equinor (EQNR - Free Report) and Covanta (CVA - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Equinor and Covanta are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold) respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EQNR is likely seeing its earnings outlook improve. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EQNR currently has a forward P/E ratio of 16.08, while CVA has a forward P/E of 375. We also note that EQNR has a PEG ratio of 0.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CVA currently has a PEG ratio of 25.
Another notable valuation metric for EQNR is its P/B ratio of 2.05. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CVA has a P/B of 3.30.
These are just a few of the metrics contributing to EQNR's Value grade of A and CVA's Value grade of C.
EQNR stands above CVA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EQNR is the superior value option right now.