RDS.A vs. CVX: Which Stock Should Value Investors Buy Now?
Investors with an interest in Oil and Gas - Integrated - International stocks have likely encountered both Shell Oil (RDS.A) and Chevron (CVX). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Shell Oil has a Zacks Rank of #2 (Buy), while Chevron has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that RDS.A has an improving earnings outlook. However, value investors will care about much more than just this.
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 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.
RDS.A currently has a forward P/E ratio of 9.90, while CVX has a forward P/E of 19.98. We also note that RDS.A has a PEG ratio of 2.47. 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. CVX currently has a PEG ratio of 4.
Another notable valuation metric for RDS.A is its P/B ratio of 0.99. 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 1.60.
These metrics, and several others, help RDS.A earn a Value grade of A, while CVX has been given a Value grade of C.
RDS.A sticks out from CVX in both our Zacks Rank and Style Scores models, so value investors will likely feel that RDS.A is the better option right now.
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