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TOT vs. CVX: Which Stock Is the Better Value Option?

Zacks Equity Research
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Investors interested in stocks from the Oil and Gas - Integrated - International sector have probably already heard of TOTAL S.A. (TOT) and Chevron (CVX). 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.

TOTAL S.A. has a Zacks Rank of #2 (Buy), while Chevron 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 TOT 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.

TOT currently has a forward P/E ratio of 9.49, while CVX has a forward P/E of 16.48. We also note that TOT has a PEG ratio of 1.02. 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. CVX currently has a PEG ratio of 2.75.

Another notable valuation metric for TOT is its P/B ratio of 1.09. 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, CVX has a P/B of 1.44.

These metrics, and several others, help TOT earn a Value grade of A, while CVX has been given a Value grade of C.

TOT 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 TOT is likely the superior value option right now.


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