FANG vs. RRC: 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 Diamondback Energy (FANG) and Range Resources (RRC). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Diamondback Energy has a Zacks Rank of #1 (Strong Buy), while Range Resources has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FANG has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
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.
FANG currently has a forward P/E ratio of 13.06, while RRC has a forward P/E of 13.18. We also note that FANG has a PEG ratio of 0.60. 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. RRC currently has a PEG ratio of 1.35.
Another notable valuation metric for FANG 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, RRC has a P/B of 1.54.
These are just a few of the metrics contributing to FANG's Value grade of B and RRC's Value grade of C.
FANG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that FANG is likely the superior value option right now.
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Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Range Resources Corporation (RRC) : Free Stock Analysis Report
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