Investors with an interest in Oil and Gas - Production and Pipelines stocks have likely encountered both MPLX LP (MPLX) and Williams Companies, Inc. (The) (WMB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 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.
MPLX LP and Williams Companies, Inc. (The) are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
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.
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.
MPLX currently has a forward P/E ratio of 11.45, while WMB has a forward P/E of 27.72. We also note that MPLX has a PEG ratio of 1.58. 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. WMB currently has a PEG ratio of 4.36.
Another notable valuation metric for MPLX is its P/B ratio of 3.68. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WMB has a P/B of 4.81.
Based on these metrics and many more, MPLX holds a Value grade of B, while WMB has a Value grade of D.
Both MPLX and WMB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MPLX is the superior value option right now.
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MPLX LP (MPLX): Free Stock Analysis Report Williams Companies, Inc. (The) (WMB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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