Investors interested in stocks from the Oil and Gas - Integrated - International sector have probably already heard of Sasol (SSL) and Chevron (CVX). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Sasol is sporting a Zacks Rank of #2 (Buy), while Chevron has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SSL likely has seen a stronger improvement to its earnings outlook than CVX has recently. But this is just one factor that value investors are interested in.
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.
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.
SSL currently has a forward P/E ratio of 6.50, while CVX has a forward P/E of 29.57. We also note that SSL has a PEG ratio of 0.92. 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. CVX currently has a PEG ratio of 1.98.
Another notable valuation metric for SSL is its P/B ratio of 0.75. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CVX has a P/B of 2.06.
Based on these metrics and many more, SSL holds a Value grade of A, while CVX has a Value grade of C.
SSL stands above CVX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SSL is the superior value option right now.
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Sasol Ltd. (SSL): Free Stock Analysis Report
Chevron Corporation (CVX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).