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RDS.A vs. XOM: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Oil and Gas - Integrated - International stocks have likely encountered both Shell Oil and Exxon Mobil (XOM - Free Report) . 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Shell Oil and Exxon Mobil are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that RDS.A has an improving earnings outlook. But this is just one factor that value investors are interested in.

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 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.

RDS.A currently has a forward P/E ratio of 12.02, while XOM has a forward P/E of 25.99. We also note that RDS.A has a PEG ratio of 3.01. 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. XOM currently has a PEG ratio of 4.12.

Another notable valuation metric for RDS.A is its P/B ratio of 0.97. 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, XOM has a P/B of 1.20.

Based on these metrics and many more, RDS.A holds a Value grade of A, while XOM has a Value grade of C.

RDS.A stands above XOM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that RDS.A is the superior value option right now.


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