Investors interested in Oil and Gas - Exploration and Production - United States stocks are likely familiar with Kolibri Global Energy Inc. (KGEI) and Viper Energy Partners (VNOM). But which of these two stocks presents investors with the better value opportunity right now? 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.
Right now, both Kolibri Global Energy Inc. and Viper Energy Partners are sporting a Zacks Rank of #2 (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.
KGEI currently has a forward P/E ratio of 7.95, while VNOM has a forward P/E of 20.63. We also note that KGEI has a PEG ratio of 0.79. 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. VNOM currently has a PEG ratio of 1.01.
Another notable valuation metric for KGEI is its P/B ratio of 1.01. 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, VNOM has a P/B of 1.69.
Based on these metrics and many more, KGEI holds a Value grade of A, while VNOM has a Value grade of D.
Both KGEI and VNOM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KGEI is the superior value option right now.
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Kolibri Global Energy Inc. (KGEI): Free Stock Analysis Report
Viper Energy Inc. (VNOM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).