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DVN vs. APA: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Updated
The Macerich Company (MAC) opens Scottsdale Fashion Square's refurbished luxury wing. The face-lift enables the mall to add an impressive tenant lineup to its roster.

Investors with an interest in Oil and Gas - Exploration and Production - United States stocks have likely encountered both Devon Energy (DVN) and Apache (APA). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Devon Energy is sporting a Zacks Rank of #2 (Buy), while Apache has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DVN likely has seen a stronger improvement to its earnings outlook than APA has recently. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

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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.

DVN currently has a forward P/E ratio of 24.99, while APA has a forward P/E of 27.87. We also note that DVN has a PEG ratio of 3.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. APA currently has a PEG ratio of 3.98.

Another notable valuation metric for DVN is its P/B ratio of 1.74. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, APA has a P/B of 2.09.

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

DVN has seen stronger estimate revision activity and sports more attractive valuation metrics than APA, so it seems like value investors will conclude that DVN is the superior option right now.


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Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Apache Corporation (APA) : Free Stock Analysis Report
 
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