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 offers value investors a better bang for their buck right now? We'll need to 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.
Currently, both Newfield Exploration and Continental Resources are holding a Zacks Rank of # 2 (Buy). 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 only part of the picture for value investors.
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.
NFX currently has a forward P/E ratio of 6.30, while CLR has a forward P/E of 15.44. We also note that NFX has a PEG ratio of 0.53. 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. CLR currently has a PEG ratio of 1.29.
Another notable valuation metric for NFX is its P/B ratio of 2.41. 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, CLR has a P/B of 3.19.
These are just a few of the metrics contributing to NFX's Value grade of A and CLR's Value grade of C.
Both NFX and CLR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NFX is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Newfield Exploration Company (NFX) : Free Stock Analysis Report
Continental Resources, Inc. (CLR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research