Investors interested in Oil and Gas - Exploration and Production - United States stocks are likely familiar with WPX Energy (WPX - Free Report) and Cheniere Energy (LNG - 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
WPX Energy has a Zacks Rank of #2 (Buy), while Cheniere Energy has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that WPX has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
WPX currently has a forward P/E ratio of 17.41, while LNG has a forward P/E of 25.10. We also note that WPX has a PEG ratio of 0.62. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LNG currently has a PEG ratio of 0.85.
Another notable valuation metric for WPX is its P/B ratio of 1.16. 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, LNG has a P/B of 10.97.
These metrics, and several others, help WPX earn a Value grade of B, while LNG has been given a Value grade of C.
WPX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that WPX is likely the superior value option right now.