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Investors interested in stocks from the Oil and Gas - Exploration and Production - United States sector have probably already heard of PDC Energy (PDCE) and Noble Energy (NBL). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
Currently, PDC Energy has a Zacks Rank of #2 (Buy), while Noble 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 PDCE has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
PDCE currently has a forward P/E ratio of 6.13, while NBL has a forward P/E of 75.57. We also note that PDCE has a PEG ratio of 0.25. 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. NBL currently has a PEG ratio of 2.16.
Another notable valuation metric for PDCE is its P/B ratio of 0.49. 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, NBL has a P/B of 0.83.
Based on these metrics and many more, PDCE holds a Value grade of A, while NBL has a Value grade of C.
PDCE has seen stronger estimate revision activity and sports more attractive valuation metrics than NBL, so it seems like value investors will conclude that PDCE is the superior option right now.
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