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PE vs. PXD: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Dollar General (DG) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Investors looking for stocks in the Oil and Gas - Exploration and Production - United States sector might want to consider either Parsley Energy (PE) or Pioneer Natural Resources (PXD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Parsley Energy is sporting a Zacks Rank of #2 (Buy), while Pioneer Natural Resources has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PE likely has seen a stronger improvement to its earnings outlook than PXD has recently. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

PE currently has a forward P/E ratio of 13.75, while PXD has a forward P/E of 19.95. We also note that PE has a PEG ratio of 0.39. 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. PXD currently has a PEG ratio of 1.94.

Another notable valuation metric for PE is its P/B ratio of 0.94. 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, PXD has a P/B of 2.12.

Based on these metrics and many more, PE holds a Value grade of B, while PXD has a Value grade of C.

PE has seen stronger estimate revision activity and sports more attractive valuation metrics than PXD, so it seems like value investors will conclude that PE is the superior option right now.


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Parsley Energy, Inc. (PE) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
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