Investors with an interest in Oil and Gas - Exploration and Production - United States stocks have likely encountered both Devon Energy (DVN) and Anadarko Petroleum (APC). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Devon Energy and Anadarko Petroleum are both sporting a Zacks Rank of # 1 (Strong Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
DVN currently has a forward P/E ratio of 13.73, while APC has a forward P/E of 26.54. We also note that DVN has a PEG ratio of 0.83. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. APC currently has a PEG ratio of 4.08.
Another notable valuation metric for DVN is its P/B ratio of 1.59. 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, APC has a P/B of 3.45.
Based on these metrics and many more, DVN holds a Value grade of A, while APC has a Value grade of C.
Both DVN and APC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DVN is the superior value option right now.
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