Investors interested in stocks from the Oil and Gas - Exploration and Production - United States sector have probably already heard of PDC Energy (PDCE) and Concho Resources (CXO). 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
PDC Energy has a Zacks Rank of #2 (Buy), while Concho Resources has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that PDCE likely has seen a stronger improvement to its earnings outlook than CXO has recently. But this is just one factor that value investors are interested in.
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.
PDCE currently has a forward P/E ratio of 15.36, while CXO has a forward P/E of 26.15. We also note that PDCE has a PEG ratio of 0.40. 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. CXO currently has a PEG ratio of 0.94.
Another notable valuation metric for PDCE is its P/B ratio of 1.16. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CXO has a P/B of 1.25.
Based on these metrics and many more, PDCE holds a Value grade of A, while CXO has a Value grade of C.
PDCE sticks out from CXO in both our Zacks Rank and Style Scores models, so value investors will likely feel that PDCE is the better option right now.
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PDC Energy, Inc. (PDCE) : Free Stock Analysis Report
Concho Resources Inc. (CXO) : Free Stock Analysis Report
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