LBRT vs. AROC: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Oil and Gas - Field Services sector have probably already heard of Liberty Oilfield Services (LBRT) and Archrock Inc. (AROC). But which of these two companies is the best option for those looking for undervalued stocks? 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 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, Liberty Oilfield Services has a Zacks Rank of #2 (Buy), while Archrock Inc. has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LBRT has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
LBRT currently has a forward P/E ratio of 6, while AROC has a forward P/E of 16.68. We also note that LBRT has a PEG ratio of 0.71. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AROC currently has a PEG ratio of 2.38.
Another notable valuation metric for LBRT is its P/B ratio of 1.71. 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, AROC has a P/B of 2.75.
These are just a few of the metrics contributing to LBRT's Value grade of A and AROC's Value grade of C.
LBRT stands above AROC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LBRT is the superior value option right now.
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Liberty Energy Inc. (LBRT) : Free Stock Analysis Report
Archrock, Inc. (AROC) : Free Stock Analysis Report
