APA vs. LNG: Which Stock Is the Better Value Option?

Investors interested in stocks from the Oil and Gas - Exploration and Production - United States sector have probably already heard of APA (APA) and Cheniere Energy (LNG). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Currently, APA has a Zacks Rank of #1 (Strong Buy), while Cheniere 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 APA has an improving earnings outlook. However, value investors will care about much more than just this.

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.

APA currently has a forward P/E ratio of 7.79, while LNG has a forward P/E of 42.74. We also note that APA has a PEG ratio of 0.78. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LNG currently has a PEG ratio of 2.85.

Another notable valuation metric for APA is its P/B ratio of 2.04. 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, LNG has a P/B of 5.07.

These are just a few of the metrics contributing to APA's Value grade of A and LNG's Value grade of C.

APA stands above LNG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that APA 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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