Investors looking for stocks in the Oil and Gas - Integrated - United States sector might want to consider either ConocoPhillips (COP - Free Report) or Tesoro Logistics LP (ANDX - 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 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.
Currently, ConocoPhillips has a Zacks Rank of #2 (Buy), while Tesoro Logistics LP has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that COP likely has seen a stronger improvement to its earnings outlook than ANDX has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
COP currently has a forward P/E ratio of 16.75, while ANDX has a forward P/E of 17.28. We also note that COP has a PEG ratio of 1.86. 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. ANDX currently has a PEG ratio of 5.08.
Another notable valuation metric for COP is its P/B ratio of 2.66. 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, ANDX has a P/B of 3.81.
These metrics, and several others, help COP earn a Value grade of B, while ANDX has been given a Value grade of D.
COP sticks out from ANDX in both our Zacks Rank and Style Scores models, so value investors will likely feel that COP is the better option right now.