Investors interested in stocks from the Oil and Gas - Exploration and Production - United States sector have probably already heard of Newfield Exploration (NFX) and Continental Resources (CLR). 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.
Newfield Exploration has a Zacks Rank of #2 (Buy), while Continental Resources 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 NFX has an improving earnings outlook. But this is only part of the picture 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.
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.
NFX currently has a forward P/E ratio of 6.80, while CLR has a forward P/E of 18.64. We also note that NFX has a PEG ratio of 0.55. 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. CLR currently has a PEG ratio of 1.52.
Another notable valuation metric for NFX is its P/B ratio of 2.92. 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, CLR has a P/B of 3.96.
These are just a few of the metrics contributing to NFX's Value grade of A and CLR's Value grade of C.
NFX 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 NFX is likely the superior value option right now.
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Newfield Exploration Company (NFX) : Free Stock Analysis Report
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