WPX vs. LNG: Which Stock Is the Better Value Option?
Investors looking for stocks in the Oil and Gas - Exploration and Production - United States sector might want to consider either WPX Energy (WPX) or Cheniere Energy (LNG). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, WPX Energy has a Zacks Rank of #2 (Buy), while Cheniere Energy has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that WPX has an improving earnings outlook. 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.
WPX currently has a forward P/E ratio of 29.42, while LNG has a forward P/E of 38.37. We also note that WPX has a PEG ratio of 1.05. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. LNG currently has a PEG ratio of 1.43.
Another notable valuation metric for WPX is its P/B ratio of 1.25. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LNG has a P/B of 8.50.
These metrics, and several others, help WPX earn a Value grade of B, while LNG has been given a Value grade of C.
WPX has seen stronger estimate revision activity and sports more attractive valuation metrics than LNG, so it seems like value investors will conclude that WPX is the superior option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.