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2 Bargain Top-Ranked Energy Stocks That Won't Stay Cheap for Long
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Key Takeaways
Oil-energy stocks are up 17.9% year to date, beating the Zacks S&P 500 composite's 10.4% rise.
Cenovus Energy trades below its industry EV/EBITDA average with stable upstream and downstream operations.
Par Pacific's diverse crude sourcing and cheaper Canadian heavy oil exposure support its refining edge.
The oil-energy sector has seen a rally of 17.9% year to date, outperforming the Zacks S&P 500 composite’s increase of 10.4%. Geopolitical tensions in the Middle East have remained an important driver of oil prices, providing continued support to energy stocks.
Image Source: Zacks Investment Research
Investors should note that West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
With the strong gain in the oil-energy space, it might have been difficult to find undervalued energy stocks that could create great value for investors’ portfolios. However, employing our proprietary stock screener, we have identified two cheap stocks that may not stay undervalued once the crowd catches on. The two stocks are Cenovus Energy Inc. (CVE - Free Report) and Par Pacific (PARR - Free Report) .
Bet on 2 Cheap Energy Stocks Right Away: CVE, PARR
Cenovus Energy is an integrated energy player with a presence in upstream and downstream businesses. With core operations in Canadian oil sands and North American refining, the company’s business model is relatively stable and can withstand the volatility in oil prices.
Currently, Cenovus Energy is undervalued, with a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 6.28x. This is below the broader industry average of 6.45x.
Par Pacific is benefiting from a refining business that remains well-positioned in the current crude-price environment. Although geopolitical tensions have recently supported crude prices, oil remains well below the highs seen earlier this year. The current price scenario continues to provide refiners like Par Pacific with relatively attractive feedstock costs.
Instead of relying on a single source of crude, PARR has been depending on crude from a variety of sources, comprising U.S. inland oil fields, imported oil delivered by ship and Canadian heavy crude.
Notably, a significant portion of crude oil sources is waterborne, while 22% consists of Canadian heavy oil. While exposed to multiple sources, Par Pacific has the option to switch if the price of one crude oil type rises.
Additionally, having exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely to have been enjoying a cost advantage. In other words, the refining player has been capable of using lower-priced fuel to produce high-value end products, giving it an edge over other refiners and helping it continue its upward trajectory.
Coming to the valuation story, PARR is currently trading at a discount. The stock is trading at a trailing 12-month EV/EBITDA multiple of 4.84x, which is lower than the broader industry average of 5.50x.
Image Source: Zacks Investment Research
Last Words
Given their discounted valuations and favorable industry positioning, both Cenovus Energy and Par Pacific appear well-positioned to gain. Both stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
View the Zacks #1 Rank List
Image: Bigstock
2 Bargain Top-Ranked Energy Stocks That Won't Stay Cheap for Long
Key Takeaways
The oil-energy sector has seen a rally of 17.9% year to date, outperforming the Zacks S&P 500 composite’s increase of 10.4%. Geopolitical tensions in the Middle East have remained an important driver of oil prices, providing continued support to energy stocks.
Investors should note that West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
With the strong gain in the oil-energy space, it might have been difficult to find undervalued energy stocks that could create great value for investors’ portfolios. However, employing our proprietary stock screener, we have identified two cheap stocks that may not stay undervalued once the crowd catches on. The two stocks are Cenovus Energy Inc. (CVE - Free Report) and Par Pacific (PARR - Free Report) .
Bet on 2 Cheap Energy Stocks Right Away: CVE, PARR
Cenovus Energy is an integrated energy player with a presence in upstream and downstream businesses. With core operations in Canadian oil sands and North American refining, the company’s business model is relatively stable and can withstand the volatility in oil prices.
Currently, Cenovus Energy is undervalued, with a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 6.28x. This is below the broader industry average of 6.45x.
Par Pacific is benefiting from a refining business that remains well-positioned in the current crude-price environment. Although geopolitical tensions have recently supported crude prices, oil remains well below the highs seen earlier this year. The current price scenario continues to provide refiners like Par Pacific with relatively attractive feedstock costs.
Instead of relying on a single source of crude, PARR has been depending on crude from a variety of sources, comprising U.S. inland oil fields, imported oil delivered by ship and Canadian heavy crude.
Notably, a significant portion of crude oil sources is waterborne, while 22% consists of Canadian heavy oil. While exposed to multiple sources, Par Pacific has the option to switch if the price of one crude oil type rises.
Additionally, having exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely to have been enjoying a cost advantage. In other words, the refining player has been capable of using lower-priced fuel to produce high-value end products, giving it an edge over other refiners and helping it continue its upward trajectory.
Coming to the valuation story, PARR is currently trading at a discount. The stock is trading at a trailing 12-month EV/EBITDA multiple of 4.84x, which is lower than the broader industry average of 5.50x.
Last Words
Given their discounted valuations and favorable industry positioning, both Cenovus Energy and Par Pacific appear well-positioned to gain. Both stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.