Investors interested in stocks from the Oil and Gas - Integrated - United States sector have probably already heard of ConocoPhillips (COP) and DT Midstream (DTM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
ConocoPhillips and DT Midstream are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that COP is likely seeing its earnings outlook improve to a greater extent. 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.
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.
COP currently has a forward P/E ratio of 16.40, while DTM has a forward P/E of 28.62. We also note that COP has a PEG ratio of 2.29. 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. DTM currently has a PEG ratio of 2.74.
Another notable valuation metric for COP is its P/B ratio of 2.28. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, DTM has a P/B of 2.76.
These are just a few of the metrics contributing to COP's Value grade of B and DTM's Value grade of D.
COP sticks out from DTM in both our Zacks Rank and Style Scores models, so value investors will likely feel that COP is the better option right now.
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ConocoPhillips (COP): Free Stock Analysis Report
DT Midstream, Inc. (DTM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).