Investors interested in stocks from the Oil and Gas - Field Services sector have probably already heard of Ranger Energy Services, Inc. (RNGR) and FMC Technologies (FTI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ranger Energy Services, Inc. has a Zacks Rank of #1 (Strong Buy), while FMC Technologies has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RNGR is likely seeing its earnings outlook improve to a greater extent. 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.
RNGR currently has a forward P/E ratio of 9.24, while FTI has a forward P/E of 17.47. We also note that RNGR has a PEG ratio of 1.85. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FTI currently has a PEG ratio of 2.91.
Another notable valuation metric for RNGR is its P/B ratio of 0.59. 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, FTI has a P/B of 1.02.
These metrics, and several others, help RNGR earn a Value grade of A, while FTI has been given a Value grade of C.
RNGR 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 RNGR is likely the superior value option right now.
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