OVV vs. CNQ: Which Stock Is the Better Value Option?
Investors with an interest in Oil and Gas - Exploration and Production - Canadian stocks have likely encountered both Ovintiv (OVV) and Canadian Natural Resources (CNQ). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ovintiv and Canadian Natural Resources 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 OVV is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
OVV currently has a forward P/E ratio of 7.28, while CNQ has a forward P/E of 11.53. We also note that OVV has a PEG ratio of 0.55. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CNQ currently has a PEG ratio of 10.78.
Another notable valuation metric for OVV is its P/B ratio of 1.43. 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, CNQ has a P/B of 2.44.
These are just a few of the metrics contributing to OVV's Value grade of A and CNQ's Value grade of C.
OVV stands above CNQ thanks to its solid earnings outlook, and based on these valuation figures, we also feel that OVV is the superior value option right now.
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Ovintiv Inc. (OVV) : Free Stock Analysis Report
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
