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Are Canadian Energy Stocks Your Best Bet Right Now?
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What will motivate an investor to allocate hard earned money toward oil companies when crude rally seems to be over? The market opinion is divided about the prospects of the commodity.
As already seen, OPEC has maintained its side of the bargain and continues to comply with the landmark accord to cut production announced on Nov 30, 2016. Though this was the best shot to recover oil prices, the crude price advancement has been cut short by the resurgence of exploration and production by U.S. shale payers. No wonder the commodity has begun to slip again.
Adding to the woes, The Goldman Sachs Group Inc. (GS - Free Report) recently projected oil weakness for the next three years. With the investment bank’s forecast, all hopes about the commodity recovering anytime soon seem to be lost.
On the other hand, we note that Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries have good Industry Ranks. Both the industries are lucrative and have returned more than the S&P 500 Index. These industries flaunt healthy fundamentals, steady cash flow and provide juicy dividends.
Strong Industry Rank
According to our industry heat map, oil industries are sliding down the industry rank list. However, Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries are still going strong.
Among the industries in the Oil & Energy sector, Oil & Gas-Canadian Exploration & Production holds the 18th rank and is among the top 7% of the industries. The Oil & Gas-Canadian Integrated industry is ranked #24 and lies in the top 9% of the industries. Investors should know that the top 50% of the Zacks Ranked industries is likely to outperform the bottom 50% by a factor of more than two to one. For more information please refer to our Zacks Industry Rank.
Major companies belonging to the industry include Gran Tierra Energy Inc. (GTE - Free Report) , Crescent Point Energy Corp. (CPG - Free Report) , Encana Corp. and Canadian Natural Resources Ltd. (CNQ - Free Report) . We note that Gran Tierra and Crescent Point sport a Zacks Rank #1 (Strong Buy). Cenovus Energy Inc. (CVE - Free Report) , which sports a Zacks Rank #1, may also be worth considering from the Oil & Gas-Canadian Integrated industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Industries Reap More Return than S&P 500
We have employed certain parameters that show that Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries are outperforming the S&P 500 Index. Let’s analyze the factors and delve deeper to find out the reasons.
Price Performance
Over the last one year, the Oil & Gas-Canadian Exploration & Production industry has outperformed the S&P 500 Index. During the aforesaid period, the industry gained 18.2% compared with 13.9% increase for the index.
The Oil & Gas-Canadian Integrated industry is also holding its own. During the above mentioned time span, the median average price movement for the industry was 6.2% as against 5.2% for the index.
Dividend Yield
Dividend yield is among the few important parameters that investors usually consider before injecting money in a particular sector.
The current dividend for the Oil & Gas-Canadian Exploration & Production industry is 2.02%, which is higher than 1.9% yield for the S&P 500 Index. Moreover, Oil & Gas-Canadian Integrated industry has healthy dividend yield of 2.13%.
Cash Flow Yield
Cash flow yield refers to the amount of free cash flow per share that a company will reward investors who buy the share at market prices.
The current cash flow yield for the Oil & Gas-Canadian Exploration & Production industry and Oil & Gas-Canadian Integrated industry are 11.3% and 12.8%, respectively. Clearly, these are significantly higher than the 5.9% yield for the S&P 500 Index.
Debt-to-Equity Ratio
The ratio signifies the industry’s financial leverage and compares it to the S&P 500 Index.
Presently, the debt-to-equity ratio for the Oil & Gas-Canadian Exploration & Production industry and Oil & Gas-Canadian Integrated industry are 56.43% and 58.97%, respectively. The ratio for the S&P 500 Index is 82.36%. Evidently, both the industries are less leveraged than the index.
EBITDA Margin
Earnings before interest, tax, depreciation and amortization (EBITDA) represent earnings from core operations. EBITDA margin determines how much operating profit the company is generating from its revenues. This is undoubtedly a vital parameter for determining the profitability of the industry.
Presently, the trailing 12-month EBITDA margin of the Oil & Gas-Canadian Exploration & Production industry is 26.7%, which is slightly higher than 25.9% margin for the S&P 500 Index. The EBITDA margin for Oil & Gas-Canadian Integrated industry is 26.2%.
Conclusion
Our analysis clearly shows that both that industries are more profitable and are less levered that S&P 500. Hence, investing in these two industries may be profitable in spite of the currently unfavorable business environment for the Energy sector.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Are Canadian Energy Stocks Your Best Bet Right Now?
What will motivate an investor to allocate hard earned money toward oil companies when crude rally seems to be over? The market opinion is divided about the prospects of the commodity.
As already seen, OPEC has maintained its side of the bargain and continues to comply with the landmark accord to cut production announced on Nov 30, 2016. Though this was the best shot to recover oil prices, the crude price advancement has been cut short by the resurgence of exploration and production by U.S. shale payers. No wonder the commodity has begun to slip again.
Adding to the woes, The Goldman Sachs Group Inc. (GS - Free Report) recently projected oil weakness for the next three years. With the investment bank’s forecast, all hopes about the commodity recovering anytime soon seem to be lost.
On the other hand, we note that Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries have good Industry Ranks. Both the industries are lucrative and have returned more than the S&P 500 Index. These industries flaunt healthy fundamentals, steady cash flow and provide juicy dividends.
Strong Industry Rank
According to our industry heat map, oil industries are sliding down the industry rank list. However, Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries are still going strong.
Among the industries in the Oil & Energy sector, Oil & Gas-Canadian Exploration & Production holds the 18th rank and is among the top 7% of the industries. The Oil & Gas-Canadian Integrated industry is ranked #24 and lies in the top 9% of the industries. Investors should know that the top 50% of the Zacks Ranked industries is likely to outperform the bottom 50% by a factor of more than two to one. For more information please refer to our Zacks Industry Rank.
Major companies belonging to the industry include Gran Tierra Energy Inc. (GTE - Free Report) , Crescent Point Energy Corp. (CPG - Free Report) , Encana Corp. and Canadian Natural Resources Ltd. (CNQ - Free Report) . We note that Gran Tierra and Crescent Point sport a Zacks Rank #1 (Strong Buy). Cenovus Energy Inc. (CVE - Free Report) , which sports a Zacks Rank #1, may also be worth considering from the Oil & Gas-Canadian Integrated industry. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Industries Reap More Return than S&P 500
We have employed certain parameters that show that Oil & Gas-Canadian Exploration & Production and Oil & Gas-Canadian Integrated industries are outperforming the S&P 500 Index. Let’s analyze the factors and delve deeper to find out the reasons.
Price Performance
Over the last one year, the Oil & Gas-Canadian Exploration & Production industry has outperformed the S&P 500 Index. During the aforesaid period, the industry gained 18.2% compared with 13.9% increase for the index.
The Oil & Gas-Canadian Integrated industry is also holding its own. During the above mentioned time span, the median average price movement for the industry was 6.2% as against 5.2% for the index.
Dividend Yield
Dividend yield is among the few important parameters that investors usually consider before injecting money in a particular sector.
The current dividend for the Oil & Gas-Canadian Exploration & Production industry is 2.02%, which is higher than 1.9% yield for the S&P 500 Index. Moreover, Oil & Gas-Canadian Integrated industry has healthy dividend yield of 2.13%.
Cash Flow Yield
Cash flow yield refers to the amount of free cash flow per share that a company will reward investors who buy the share at market prices.
The current cash flow yield for the Oil & Gas-Canadian Exploration & Production industry and Oil & Gas-Canadian Integrated industry are 11.3% and 12.8%, respectively. Clearly, these are significantly higher than the 5.9% yield for the S&P 500 Index.
Debt-to-Equity Ratio
The ratio signifies the industry’s financial leverage and compares it to the S&P 500 Index.
Presently, the debt-to-equity ratio for the Oil & Gas-Canadian Exploration & Production industry and Oil & Gas-Canadian Integrated industry are 56.43% and 58.97%, respectively. The ratio for the S&P 500 Index is 82.36%. Evidently, both the industries are less leveraged than the index.
EBITDA Margin
Earnings before interest, tax, depreciation and amortization (EBITDA) represent earnings from core operations. EBITDA margin determines how much operating profit the company is generating from its revenues. This is undoubtedly a vital parameter for determining the profitability of the industry.
Presently, the trailing 12-month EBITDA margin of the Oil & Gas-Canadian Exploration & Production industry is 26.7%, which is slightly higher than 25.9% margin for the S&P 500 Index. The EBITDA margin for Oil & Gas-Canadian Integrated industry is 26.2%.
Conclusion
Our analysis clearly shows that both that industries are more profitable and are less levered that S&P 500. Hence, investing in these two industries may be profitable in spite of the currently unfavorable business environment for the Energy sector.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>