Investors interested in Oil and Gas - Field Services stocks are likely familiar with Drilling Tools International Corp. (DTI) and Core Laboratories (CLB). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Drilling Tools International Corp. and Core Laboratories are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This means that DTI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
DTI currently has a forward P/E ratio of 16.84, while CLB has a forward P/E of 29.42. We also note that DTI has a PEG ratio of 1.87. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CLB currently has a PEG ratio of 3.15.
Another notable valuation metric for DTI is its P/B ratio of 0.92. 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, CLB has a P/B of 2.87.
These are just a few of the metrics contributing to DTI's Value grade of B and CLB's Value grade of C.
DTI has seen stronger estimate revision activity and sports more attractive valuation metrics than CLB, so it seems like value investors will conclude that DTI is the superior option right now.
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Drilling Tools International Corp. (DTI): Free Stock Analysis Report
Core Laboratories Inc. (CLB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).