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ETRN vs. OXY: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in stocks from the Oil and Gas - Integrated - United States sector have probably already heard of Equitrans Midstream Corporation (ETRN) and Occidental Petroleum (OXY). 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.

Equitrans Midstream Corporation has a Zacks Rank of #1 (Strong Buy), while Occidental Petroleum has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ETRN is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

ETRN currently has a forward P/E ratio of 10.62, while OXY has a forward P/E of 12.40. We also note that ETRN has a PEG ratio of 1.52. 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. OXY currently has a PEG ratio of 2.48.

Another notable valuation metric for ETRN is its P/B ratio of 1.07. 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, OXY has a P/B of 1.69.

Based on these metrics and many more, ETRN holds a Value grade of B, while OXY has a Value grade of C.

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


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Equitrans Midstream Corporation (ETRN) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
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Zacks Investment Research