Investors interested in stocks from the Oil and Gas - Field Services sector have probably already heard of Halliburton (HAL) and Baker Hughes (BKR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Halliburton and Baker Hughes are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that HAL likely has seen a stronger improvement to its earnings outlook than BKR has recently. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
HAL currently has a forward P/E ratio of 14.99, while BKR has a forward P/E of 25.76. We also note that HAL has a PEG ratio of 1.52. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. BKR currently has a PEG ratio of 2.12.
Another notable valuation metric for HAL is its P/B ratio of 2.71. 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, BKR has a P/B of 2.99.
These metrics, and several others, help HAL earn a Value grade of B, while BKR has been given a Value grade of C.
HAL stands above BKR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HAL is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
