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RRC vs. SM: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Updated
Is (HRS) Outperforming Other Computer and Technology Stocks This Year?

Investors interested in stocks from the Oil and Gas - Exploration and Production - United States sector have probably already heard of Range Resources (RRC) and SM Energy (SM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, both Range Resources and SM Energy are holding a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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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.

RRC currently has a forward P/E ratio of 16.21, while SM has a forward P/E of 72.10. We also note that RRC has a PEG ratio of 1.29. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SM currently has a PEG ratio of 7.21.

Another notable valuation metric for RRC is its P/B ratio of 0.75. 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, SM has a P/B of 1.23.

These are just a few of the metrics contributing to RRC's Value grade of A and SM's Value grade of C.

Both RRC and SM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that RRC is the superior value option right now.


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Range Resources Corporation (RRC) : Free Stock Analysis Report
 
SM Energy Company (SM) : Free Stock Analysis Report
 
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Zacks Investment Research