Back to top

Image: Bigstock

4 Energy Stocks That Wall Street Analysts Love Don't Cost Much

Read MoreHide Full Article

Even as fears revolving around high inflation and slowing growth somewhat cloud the outlook for Oil/Energy, it has remained the best S&P 500 sector this year. The space has generated a total return of nearly 58% in 2022 against the S&P 500’s loss of around 15%.

Apart from a positive fundamental picture, the sector is enjoying support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130 on concerns about supplies from Russia, which is one of the world's largest producers of the commodity.

Oil has pulled back from those lofty levels. However, the commodity still has enough reasons to stay elevated in the near-to-medium term, with the conflict showing no sign of a quick resolution, the risk of dwindling inventory and the influential oil exporters’ group OPEC sticking to a conservative production profile.

At the same time, the Energy sector is notoriously volatile, with sudden positive surprises and crashes. Against this backdrop, it will be fruitful to invest in broker-recommended stocks. In particular, we advocate top-ranked stocks trading under $10 per share.

Taking this all into account, NexTier Oilfield Solutions (NEX - Free Report) , Select Energy Services (WTTR - Free Report) , Kosmos Energy (KOS - Free Report) , and W&T Offshore (WTI - Free Report) make the cut.

Follow Expert Opinion

The volatility and uncertainty of oil prices make investment decisions difficult for individuals. With the future direction of the commodity’s movement being anybody's guess, it might be a wise decision to go ahead with stocks preferred by analysts, who have deep fundamental knowledge and understanding of the industry and its companies.

The brokers have direct communication with top management, which gives them a deeper insight into what is happening in a particular company. They diligently review companies’ publicly available documents and even attend conference calls.

Moreover, brokers generally have an in-depth understanding of the overall sector and industry. They place company fundamentals against the current economic backdrop to determine the suitability of a particular stock as an investment.

Look for Inexpensive Stocks With Strong Fundamentals

Low-priced stocks never go out of fashion and one doesn’t really need to be a genius to understand why.

For starters, one can buy a lot many shares of a company for a certain amount. While expenditures seem to increase exponentially, the same is usually not true for our income. From the little that we actually manage to set aside for investment, one would definitely prefer to buy 100 shares, say at around $10, rather than buying 10 shares at $100. Often these $10 firms hold tremendous potential but remain off investors’ radar.

However, most of these players are generally not industry giants and hence, a little extra effort must be put in to select the correct stocks.

This is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.

Our Choices

We have picked four energy stocks with a Zacks Rank of #1 (Strong Buy) or 2 (Buy) as our research shows such stocks offer good investment opportunities. The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Our chosen stocks are also trading under $10 with Average Broker Recommendation of 2 or less on a scale of 1 to 5 (Strong Buy to Strong Sell).

NexTier Oilfield Solutions: NexTier Oilfield Solutions is a provider of technical products and services to drillers of oil and gas wells. The company continues to strengthen the customer base for its high-return projects, well-site offerings and digital tools (like NexHub). NEX’s integrated frac fleet services command premium pricing, while its conservative balance sheet and nimble cost structure allow returning a sizeable portion of free cash to shareholders.

The 2022 Zacks Consensus Estimate for this Houston, TX-based firm indicates 427.9% year-over-year earnings per share growth. NexTier Oilfield Solutions beat the Zacks Consensus Estimate for earnings in three of the last four quarters. NEX has a trailing four-quarter earnings surprise of roughly 271.1%, on average.   

Zacks Rank: #1
Average Broker Recommendation: 1.57
Last Closing Price: $9.35

Select Energy Services: The Houston, TX-headquartered company provides its customers — primarily oilfield operators — with sophisticated end-to-end water solutions, stimulation chemicals, and ESG offerings. As the rig and frac markets continue to improve, we expect accelerated growth in its base business. Helped by acquisitions, Select Energy Services continues to gain market share and improve profitability.

The 2022 Zacks Consensus Estimate for the firm indicates 231.3% year-over-year earnings per share growth. Over the past 30 days, WTTR saw the Zacks Consensus Estimate for 2022 move up 50%. Select Energy Services has a trailing four-quarter earnings surprise of roughly 30.6%, on average.

Zacks Rank: #1
Average Broker Recommendation: 1
Last Closing Price: $7.87

Kosmos Energy: Kosmos Energy is an oil and gas explorer focused on offshore Ghana, Equatorial Guinea and the U.S. Gulf of Mexico. The dual-listed (NYSE & London) company’s low-cost assets, growing free cash flow generation and solid balance sheet are likely to increase shareholder returns.

The 2022 Zacks Consensus Estimate for this Dallas, TX-based firm indicates 1,933.3% year-over-year earnings per share growth. Kosmos Energy has a trailing four-quarter earnings surprise of roughly 20%, on average. KOS is valued at around $2.9 billion.   

Zacks Rank: #2
Average Broker Recommendation: 1
Last Closing Price: $6.02

W&T Offshore: Headquartered in Houston, TX, W&T Offshore, Inc. is a leading oil and natural gas explorer with operations primarily focused on resources located off the coast of Gulf of Mexico. WTI has been generating positive free cash flows for 19 consecutive quarters, reflecting strong operations.

The 2022 Zacks Consensus Estimate for the firm indicates 747.8% year-over-year earnings per share growth. W&T Offshore beat the Zacks Consensus Estimate for earnings in each of the last four quarters. NEX has a trailing four-quarter earnings surprise of roughly 75.6%, on average.

Zacks Rank: #2
Average Broker Recommendation: 1
Last Closing Price: $6.14

Published in