Investors interested in Oil and Gas - Integrated - United States stocks are likely familiar with Marathon Oil (MRO) and DT Midstream, Inc. (DTM). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Marathon Oil has a Zacks Rank of #2 (Buy), while DT Midstream, Inc. has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MRO 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.
MRO currently has a forward P/E ratio of 12.23, while DTM has a forward P/E of 13.75. We also note that MRO has a PEG ratio of 0.34. 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. DTM currently has a PEG ratio of 3.44.
Another notable valuation metric for MRO is its P/B ratio of 0.92. 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, DTM has a P/B of 1.04.
These metrics, and several others, help MRO earn a Value grade of B, while DTM has been given a Value grade of D.
MRO 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 MRO is likely the superior value option right now.
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