Investors with an interest in Oil and Gas - Refining and Marketing - Master Limited Partnerships stocks have likely encountered both Western Midstream (WES) and Phillips 66 Partners LP (PSXP). 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.
Western Midstream and Phillips 66 Partners LP 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 WES 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 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 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.
WES currently has a forward P/E ratio of 9.11, while PSXP has a forward P/E of 13.98. We also note that WES has a PEG ratio of 1.52. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. PSXP currently has a PEG ratio of 3.50.
Another notable valuation metric for WES is its P/B ratio of 2.48. 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, PSXP has a P/B of 6.66.
Based on these metrics and many more, WES holds a Value grade of B, while PSXP has a Value grade of D.
WES has seen stronger estimate revision activity and sports more attractive valuation metrics than PSXP, so it seems like value investors will conclude that WES is the superior option right now.
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Western Gas Equity Partners, LP (WES) : Free Stock Analysis Report
Phillips 66 Partners LP (PSXP) : Free Stock Analysis Report
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