NESR vs. FET: Which Stock Should Value Investors Buy Now?

Investors interested in Oil and Gas - Mechanical and and Equipment stocks are likely familiar with National Energy Services Reunited (NESR) and Forum Energy Technologies (FET). 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 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, both National Energy Services Reunited and Forum Energy Technologies are holding a Zacks Rank of #1 (Strong Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.

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.

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.

NESR currently has a forward P/E ratio of 17.61, while FET has a forward P/E of 20.43. We also note that NESR has a PEG ratio of 0.30. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FET currently has a PEG ratio of 2.55.

Another notable valuation metric for NESR is its P/B ratio of 3.11. 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, FET has a P/B of 3.18.

These metrics, and several others, help NESR earn a Value grade of B, while FET has been given a Value grade of D.

Both NESR and FET are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NESR is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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