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The Energy sector has trended up since the fourth quarter of 2020 but in 2022 that growth has accelerated.
In addition to the inventory shortage that pre-existed, energy demand has been escalating as a result of increased consumption, as economies around the world started opening up, with more cars on the road, and more factories, offices, eateries and service providers in operation. When the Ukraine war started earlier this year, it interrupted a market that was already in a precarious balance to deal with with the surge in demand.
The war made things much worse because it forced Russian oil out of an already struggling market. While the U.S. appeared to have every intention of helping out with the situation, American oil companies, much to the relief of investors, didn’t jump to build out infrastructure as they have often done in the past when demand was so strong.
One possible reason for this could be the pressure on oil and gas companies to meet environmental targets and ESG requirements. If they added capacity now, they could be stuck with weak utilization later on, which can’t be a good strategy for any company. And as a consequence of their restraint, they are likely to enjoy the strong pricing in the foreseeable future.
So this is a fantastic opportunity for oil companies to continue growing their revenue and profits. For the general public it means that things are not likely to get cheaper any time soon. And for the investor, it means that you absolutely need some oil stocks right now to balance out the effects of inflation on your holdings.
Because the future is so bright for the sector, analysts continue to raise their estimates, ensuring that the sector remains undervalued on practically any metric although it has surged about 39.2% this year, more than double the S&P 500’s 16.7%.
The sector trades at 7.8X forward earnings, 0.82X forward sales and a PEG ratio of 0.42. It is undervalued on all counts and also compares favorably with the S&P 500, which trades at 17.23X P/E, 4.06X sales and a PEG of 1.59.
Given the importance of investing in this segment, I’ve selected Crescent Point Energy Corp. (CPG - Free Report) , CVR Energy, Inc. (CVI - Free Report) , DAQO New Energy Corp. (DQ - Free Report) , Enerplus Corp. (ERF - Free Report) and Ranger Oil Corp. that are looking good today:
The Zacks Rank #1 stock is up 11.6% in the past week. With an industry rank of 23 (top 9%, Zacks classifies 250+ industries and the top 50% usually outperforms the bottom 50% 2 to 1) and VGM Score of B.
The stock and industry ranks, and VGM Score indicate that further upside. Additionally, its 2022 estimate is up 96.2% in the last 30 days. The 2023 estimate is up 17.8%.
CVR too is a Zacks Rank #1 stock currently seeing some momentum. It has appreciated 14.4% in the past week. Its industry rank of 3 (top 1%) and VGM Score of A when read along with the #1 rank on the shares indicates more upside. Analysts too are optimistic: within the last 30 days, they’ve raised the 2022 estimate by 13.3% and the 2023 estimate by 34.1%.
The Zacks #1 rank and VGM Score B on DAQO New Energy are stronger indications of near-term upside when its position in the top 29% of industries is also considered. The evidence of this is seen in the 29.8% increase in its share prices over the past week. Analysts also like this stock since they’ve taken their 2022 estimate up 10.0% in the past week, which is again nothing compared to the 49.7% increase in the 2023 estimate.
Enerplus has a Zacks Rank #1 and VGM Score A. The Oil and Gas - Exploration and Production – Canadian industry to which it belongs is in the top 9%. The shares are up 12.5% in the last 7 days. This is likely to be in reaction to analysts raising their estimates (by 2.7% in 2022 and 3.6% in 2023) in the last 30 days.
Ranger Oil Corporation
Ranger Oil shares have appreciated 23.3% in the past week. It carries a Zacks Rank #1 and VGM Score A, which along with the industry’s positioning in the top 7% are indictive further near-term upside potential. In the last 30 days, analysts have raised their 2022 and 2023 estimates by a respective 10.5% and 9.3%.
One-Month Price Performance
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Can Energy Stocks Move Higher?
The Energy sector has trended up since the fourth quarter of 2020 but in 2022 that growth has accelerated.
In addition to the inventory shortage that pre-existed, energy demand has been escalating as a result of increased consumption, as economies around the world started opening up, with more cars on the road, and more factories, offices, eateries and service providers in operation. When the Ukraine war started earlier this year, it interrupted a market that was already in a precarious balance to deal with with the surge in demand.
The war made things much worse because it forced Russian oil out of an already struggling market. While the U.S. appeared to have every intention of helping out with the situation, American oil companies, much to the relief of investors, didn’t jump to build out infrastructure as they have often done in the past when demand was so strong.
One possible reason for this could be the pressure on oil and gas companies to meet environmental targets and ESG requirements. If they added capacity now, they could be stuck with weak utilization later on, which can’t be a good strategy for any company. And as a consequence of their restraint, they are likely to enjoy the strong pricing in the foreseeable future.
So this is a fantastic opportunity for oil companies to continue growing their revenue and profits. For the general public it means that things are not likely to get cheaper any time soon. And for the investor, it means that you absolutely need some oil stocks right now to balance out the effects of inflation on your holdings.
Because the future is so bright for the sector, analysts continue to raise their estimates, ensuring that the sector remains undervalued on practically any metric although it has surged about 39.2% this year, more than double the S&P 500’s 16.7%.
The sector trades at 7.8X forward earnings, 0.82X forward sales and a PEG ratio of 0.42. It is undervalued on all counts and also compares favorably with the S&P 500, which trades at 17.23X P/E, 4.06X sales and a PEG of 1.59.
Given the importance of investing in this segment, I’ve selected Crescent Point Energy Corp. (CPG - Free Report) , CVR Energy, Inc. (CVI - Free Report) , DAQO New Energy Corp. (DQ - Free Report) , Enerplus Corp. (ERF - Free Report) and Ranger Oil Corp. that are looking good today:
Crescent Point Energy Corp. (CPG - Free Report)
The Zacks Rank #1 stock is up 11.6% in the past week. With an industry rank of 23 (top 9%, Zacks classifies 250+ industries and the top 50% usually outperforms the bottom 50% 2 to 1) and VGM Score of B.
The stock and industry ranks, and VGM Score indicate that further upside. Additionally, its 2022 estimate is up 96.2% in the last 30 days. The 2023 estimate is up 17.8%.
CVR Energy, Inc. (CVI - Free Report)
CVR too is a Zacks Rank #1 stock currently seeing some momentum. It has appreciated 14.4% in the past week. Its industry rank of 3 (top 1%) and VGM Score of A when read along with the #1 rank on the shares indicates more upside. Analysts too are optimistic: within the last 30 days, they’ve raised the 2022 estimate by 13.3% and the 2023 estimate by 34.1%.
DAQO New Energy Corp. (DQ - Free Report)
The Zacks #1 rank and VGM Score B on DAQO New Energy are stronger indications of near-term upside when its position in the top 29% of industries is also considered. The evidence of this is seen in the 29.8% increase in its share prices over the past week. Analysts also like this stock since they’ve taken their 2022 estimate up 10.0% in the past week, which is again nothing compared to the 49.7% increase in the 2023 estimate.
Enerplus Corporation (ERF - Free Report)
Enerplus has a Zacks Rank #1 and VGM Score A. The Oil and Gas - Exploration and Production – Canadian industry to which it belongs is in the top 9%. The shares are up 12.5% in the last 7 days. This is likely to be in reaction to analysts raising their estimates (by 2.7% in 2022 and 3.6% in 2023) in the last 30 days.
Ranger Oil Corporation
Ranger Oil shares have appreciated 23.3% in the past week. It carries a Zacks Rank #1 and VGM Score A, which along with the industry’s positioning in the top 7% are indictive further near-term upside potential. In the last 30 days, analysts have raised their 2022 and 2023 estimates by a respective 10.5% and 9.3%.
One-Month Price Performance
Image Source: Zacks Investment Research