Investors looking for stocks in the Oil and Gas - Integrated - United States sector might want to consider either Occidental Petroleum (OXY) or 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.
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 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, Occidental Petroleum has a Zacks Rank of #2 (Buy), while DT Midstream has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that OXY has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
OXY currently has a forward P/E ratio of 9.37, while DTM has a forward P/E of 26.00. We also note that OXY has a PEG ratio of 0.90. 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 3.32.
Another notable valuation metric for OXY is its P/B ratio of 1.77. 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, DTM has a P/B of 2.46.
Based on these metrics and many more, OXY holds a Value grade of A, while DTM has a Value grade of D.
OXY has seen stronger estimate revision activity and sports more attractive valuation metrics than DTM, so it seems like value investors will conclude that OXY is the superior option right now.
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Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
DT Midstream, Inc. (DTM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).