Investors looking for stocks in the Oil and Gas - Integrated - International sector might want to consider either Sasol (SSL - Free Report) or Chevron (CVX - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both Sasol and Chevron are sporting a Zacks Rank of # 1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SSL currently has a forward P/E ratio of 9.21, while CVX has a forward P/E of 14.57. We also note that SSL has a PEG ratio of 1.78. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CVX currently has a PEG ratio of 2.08.
Another notable valuation metric for SSL is its P/B ratio of 1.39. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CVX has a P/B of 1.56.
These metrics, and several others, help SSL earn a Value grade of B, while CVX has been given a Value grade of C.
Both SSL and CVX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SSL is the superior value option right now.