With the world economy still coming to grips with the post-pandemic new normal, investors may enjoy significant upside with the most undervalued energy stocks to buy. Let’s be real – no matter what anybody says about pivoting to renewables, for now, hydrocarbons rule. Further, with China reopening its borders, the influx of commercial activity should lift demand for critical resources.
Still, when chasing after a relatively obvious trade, investors may benefit from seeking out underappreciated names within the target ecosystem. And the most undervalued energy stocks to buy allow you to do just that. These enterprises might not command the name recognition of the big dogs. However, fundamental relevancies could see their valuations dramatically rise.
Before we dive in, let’s establish some ground rules. First, by undervalued, I’m referring to a trailing-12-month earnings basis. Second, I’m only going to feature enterprises that enjoy a consensus bullish opinion. Finally, I deliberately avoided over-the-counter stocks to limit the potential for extremely volatile ideas. So, if you’re ready, let’s discuss the most undervalued energy stocks to buy.
|GTE||Gran Tierra Energy||$0.90|
|CPG||Crescent Point Energy||$6.94|
SilverBow Resources (SBOW)
An independent exploration and production (upstream) company, SilverBow Resources (NYSE:SBOW) features assets in the Eagle Ford Shale and Austin Chalk in South Texas. Although the macroeconomic and geopolitical forces of 2022 contributed to increased relevance for SBOW, it traded in a choppy manner. In the trailing year, shares barely moved up against parity.
Nevertheless, if you want to focus on the most undervalued energy stocks to buy, SilverBow presents a high-risk, high-reward opportunity. Currently, the market prices SBOW at a trailing multiple of 1.73. In contrast, the sector median stands at 8.35. Regarding discount to earnings, SilverBow ranks better than 93.11% of the competition.
Notably, SilverBow also enjoys other financial attributes. Perhaps most notably, its net margin pings at nearly 40%. This stat ranks above 88% of sector players. According to TipRanks, the one expert covering SBOW rates it a buy. Further, the analyst’s price target stands at $48, implying an upside potential of over 91%.
Gran Tierra Energy (GTE)
Based in Canada, Gran Tierra Energy (NYSEAMERICAN:GTE) focuses on oil and gas exploration, development, and production, particularly in South America. Due to global supply constraint concerns in the first half of 2022, GTE managed to perform well. However, the last several months have been poor for the enterprise. In the trailing year, GTE gave up over 9% of its equity value.
Still, the bulls to their credit appear ready to bid up shares higher. Since the January opener, GTE gained over 4%. Currently, the market prices shares at a trailing multiple of 2.06. As a discount to earnings, Gran Tierra ranks better than 90.72% of sector peers. Notably, GTE also trades hands at 0.54-times sales and 0.84-times book value, both stats favorably below their respective median values.
As well, Gran Tierra – despite Gurufocus.com’s warning that it’s a possible value trap – features an extremely high-quality business, evidenced by its return on equity of 51.82%. For those wishing to speculate on the most undervalued energy stocks to buy, GTE could be interesting. Currently, GTE features a moderate buy consensus rating and a price target implying 67% upside potential.
Callon Petroleum (CPE)
Although levered to a suddenly relevant industry, Callon Petroleum (NYSE:CPE) hasn’t enjoyed many benefits from broader trends. For instance, its earnings performance this year has been mixed. Further, the price action yielded little reason for confidence. In the trailing year, CPE lost over 22% of its equity value.
However, Callon could be on a comeback trail, particularly as positive fundamentals like China’s reopening bolster the industry. Since the January opener, CPE gained over 20% of its equity value. Presently, the market prices CPE at a trailing multiple of 2.09. As a discount to earnings, Callon ranks better than 91.02% of its rivals.
As with the other names on this list of undervalued energy stocks to buy, Callon enjoys other positive fiscal stats. For instance, both its price-to-book and price-to-sales ratios rate below their respective industry median values. At the moment, Wall Street analysts rate CPE as a consensus moderate buy. Further, their average price target implies an upside potential of over 43%.
PBF Energy (PBF)
Based in New Jersey, PBF Energy (NYSE:PBF) is a petroleum refiner and supplier of unbranded transportation fuels, heating oils, lubricants, petrochemical feedstocks, and other petroleum products. Fortunately for shareholders that got in during the pandemic lows, PBF made the most out of 2022. For instance, in the trailing year, shares gained nearly 127% of equity value.
Despite this outsized performance, PBF still ranks among the most undervalued energy stocks to buy. Presently, the market prices PBF at a trailing multiple of 2.09. As a discount relative to earnings, PBF ranks better than 90.42% of sector peers.
Further, PBF stock trades at a forward multiple of 5.01, slipping underneath the median value of 6.91. As a discount to forward earnings, PBF ranks better than 6.27% of the competition.
Right now, Wall Street analysts rate PBF as a consensus moderate buy. Additionally, their average price target stands at $51.33. This implies an upside potential of nearly 28%, making PBF one of the most undervalued energy stocks to buy.
Chord Energy (CHRD)
Headquartered in Houston, Texas, Chord Energy (NASDAQ:CHRD) engages in hydrocarbon exploration and hydraulic fracturing in the Williston Basin in North Dakota and Montana. Although demand for hydrocarbons increased significantly, Chord didn’t holistically benefit from the circumstances. In the trailing year, CHRD actually lost 2% of its equity value.
To be fair, Chord Energy seeks a comeback. Since the January opener, shares gained over 7%. Currently, the market prices CHRD at a trailing multiple of 2.31. Regarding discount to earnings, Chord ranks better than 88.92% of the industry. As well, CHRD trades hands at 2.83 times free cash flow (FCF). In contrast, the sector median stands at 7.8 times.
Conspicuously, Wall Street analysts rate CHRD as a consensus and unanimous strong buy. Moreover, their average price target pings at $189.17, implying an upside potential of almost 34%. For a higher-confidence play from the experts, CHRD represents a worthy candidate for most undervalued energy stocks to buy.
Vermilion Energy (VET)
Based in Canada, Vermilion Energy (NYSE:VET) is an international oil and gas producer. Per its public profile, Vermilion features operations in North America, Europe, and Australia. Although gaining a boost of relevance throughout most of last year, recent volatility negatively impacted the enterprise. For instance, in the trailing six months, VET lost nearly 39% of its equity value.
Still, contrarian investors of the most undervalued energy stocks to buy may want to consider taking a potshot here. At the moment, the market prices VET at a trailing multiple of 2.47. In terms of a discount against earnings, Vermilion ranks better than 87.28% of sector rivals. In addition, VET trades hands at 5.53 times forward earnings. This ranks better than 62.54% of its peers for a discount against forward earnings.
Right now, Wall Street analysts peg Vermilion as a consensus moderate buy. Further, their average price target stands at $22.79, implying an upside potential of over 58%. As well, sentiment among hedge funds rates is very positive.
Crescent Point Energy (CPG)
Also based in Canada, Crescent Point Energy (NYSE:CPG) focuses primarily on light oil production in southern Saskatchewan and central Alberta. To be sure, the price action for CPG has been choppy since 2022. That said, in the trailing year, it managed to operate above the noise, gaining 4.8%. In the year so far, CPG swung higher to the tune of nearly 7%.
According to data from Gurufocus.com, the market prices CPG at a trailing multiple of 2.48. Regarding discount to earnings, Crescent Point ranks better than 86.98% of the competition. Also, CPG trades at a forward multiple of 4.23. Here, the discount to earnings ranks above 76.13% of the industry. Crescent also trades at a discount relative to book value and free cash flow, among other key metrics.
Perhaps most enticingly, Wall Street analysts assess CPG as a consensus strong buy. In addition, their average price target stands at $10.30, implying an upside potential of almost 48%. Lastly, hedge fund sentiment rates as positive.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.