Investors looking for stocks in the Oil and Gas - Field Services sector might want to consider either Drilling Tools International Corp. (DTI) or Core Laboratories (CLB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Drilling Tools International Corp. and Core Laboratories are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DTI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
DTI currently has a forward P/E ratio of 22.80, while CLB has a forward P/E of 23.06. We also note that DTI has a PEG ratio of 2.53. 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. CLB currently has a PEG ratio of 2.95.
Another notable valuation metric for DTI is its P/B ratio of 0.67. 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, CLB has a P/B of 2.01.
Based on these metrics and many more, DTI holds a Value grade of A, while CLB has a Value grade of C.
DTI has seen stronger estimate revision activity and sports more attractive valuation metrics than CLB, so it seems like value investors will conclude that DTI is the superior option right now.
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