Investors interested in stocks from the Oil and Gas - Integrated - International sector have probably already heard of Shell Oil (RDS.A - Free Report) and 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Shell Oil has a Zacks Rank of #2 (Buy), while Chevron has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that RDS.A likely has seen a stronger improvement to its earnings outlook than CVX has recently. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 12.31, while CVX has a forward P/E of 19.20. We also note that RDS.A has a PEG ratio of 1.61. 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 3.85.
Another notable valuation metric for RDS.A is its P/B ratio of 1.31. 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 1.53.
These metrics, and several others, help RDS.A earn a Value grade of A, while CVX has been given a Value grade of C.
RDS.A has seen stronger estimate revision activity and sports more attractive valuation metrics than CVX, so it seems like value investors will conclude that RDS.A is the superior option right now.