Investors interested in stocks from the Oil and Gas - Integrated - United States sector have probably already heard of Marathon Oil (MRO - Free Report) and Occidental Petroleum (OXY - 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.
Marathon Oil and Occidental Petroleum are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that MRO is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
MRO currently has a forward P/E ratio of 22.92, while OXY has a forward P/E of 28.16. We also note that MRO has a PEG ratio of 2.95. 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. OXY currently has a PEG ratio of 5.63.
Another notable valuation metric for MRO is its P/B ratio of 0.78. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, OXY has a P/B of 1.20.
Based on these metrics and many more, MRO holds a Value grade of B, while OXY has a Value grade of C.
MRO has seen stronger estimate revision activity and sports more attractive valuation metrics than OXY, so it seems like value investors will conclude that MRO is the superior option right now.