Investors looking for stocks in the Oil and Gas - Integrated - International sector might want to consider either Shell Oil (RDS.A - Free Report) or Chevron (CVX - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Shell Oil and Chevron have a Zacks Rank of # 1 (Strong Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
RDS.A currently has a forward P/E ratio of 11.63, while CVX has a forward P/E of 15.07. We also note that RDS.A has a PEG ratio of 0.83. 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. CVX currently has a PEG ratio of 2.15.
Another notable valuation metric for RDS.A is its P/B ratio of 1.40. 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, CVX has a P/B of 1.58.
Based on these metrics and many more, RDS.A holds a Value grade of A, while CVX has a Value grade of C.
Both RDS.A and CVX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RDS.A is the superior value option right now.