Investors interested in stocks from the Oil and Gas - Production and Pipelines sector have probably already heard of Pembina Pipeline (PBA) and Williams Companies, Inc. The (WMB). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Pembina Pipeline has a Zacks Rank of #2 (Buy), while Williams Companies, Inc. The has a Zacks Rank of #3 (Hold). This means that PBA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
PBA currently has a forward P/E ratio of 11.82, while WMB has a forward P/E of 22.21. We also note that PBA has a PEG ratio of 3.94. 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. WMB currently has a PEG ratio of 6.35.
Another notable valuation metric for PBA is its P/B ratio of 1.91. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, WMB has a P/B of 3.07.
Based on these metrics and many more, PBA holds a Value grade of B, while WMB has a Value grade of D.
PBA sticks out from WMB in both our Zacks Rank and Style Scores models, so value investors will likely feel that PBA is the better option right now.
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