Investors interested in Oil and Gas - Exploration and Production - United States stocks are likely familiar with APA (APA) and Cheniere Energy (LNG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Both APA and Cheniere Energy have a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
APA currently has a forward P/E ratio of 7.98, while LNG has a forward P/E of 34.97. We also note that APA has a PEG ratio of 0.80. 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. LNG currently has a PEG ratio of 2.33.
Another notable valuation metric for APA is its P/B ratio of 2.29. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LNG has a P/B of 5.82.
These are just a few of the metrics contributing to APA's Value grade of A and LNG's Value grade of C.
Both APA and LNG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that APA is the superior value option right now.
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APA Corporation (APA) : Free Stock Analysis Report
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
