Investors with an interest in Oil and Gas - Refining and Marketing stocks have likely encountered both PBF Energy (PBF) and Neste OYJ - Unsponsored ADR (NTOIY). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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 PBF Energy and Neste OYJ - Unsponsored ADR have a Zacks Rank of #1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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.
PBF currently has a forward P/E ratio of 6.59, while NTOIY has a forward P/E of 11.94. We also note that PBF has a PEG ratio of 0.17. 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. NTOIY currently has a PEG ratio of 0.23.
Another notable valuation metric for PBF is its P/B ratio of 0.86. 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, NTOIY has a P/B of 3.08.
These metrics, and several others, help PBF earn a Value grade of B, while NTOIY has been given a Value grade of C.
Both PBF and NTOIY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PBF 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.
