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Nidhi Agarwal

3 Undervalued Energy Stocks With High Price Targets

Due to increasing geopolitical uncertainties and extended oil production cuts by OPEC+ members, oil demand is surging rapidly while supply remains limited, resulting in higher prices. Given the industry tailwinds, it could be wise to invest in fundamentally sound energy stocks, such as Cenovus Energy Inc. (CVE), DNOW Inc. (DNOW), and MRC Global Inc. (MRC), with high price targets.

OPEC+ enforced output cuts since late 2022 to stabilize the market. The group agreed to extend the current 2.2 million bpd cut until the end of September, with plans to gradually phase it out starting in October. Additionally, during the second half of this year, oil demand is expected to grow by an average of 2.3 million b/d.

As per the U.S. Energy Information Administration (EIA), the extension of voluntary OPEC+ production cuts might cause global oil inventories to fall through the first quarter of 2025, leading to crude oil prices to rise from early June levels. The World Bank has warned that a major conflict in the Middle East could cause an energy shock, driving oil prices above $100 a barrel.

Considering these conducive trends, let’s analyze the fundamental aspects of the featured energy stocks.

Cenovus Energy Inc. (CVE)

Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products internationally. It operates through four segments: Oil Sands; Conventional; Offshore, Canadian Refining; and U.S. Refining.

On May 1, CVE’s Board of Directors declared a quarterly base dividend of $0.18 per common share, payable on June 28, 2024, to shareholders of record as of June 14, 2024.

CVE pays an annual dividend of $0.42 per share, which translates to a yield of 2.79% on the current share price. Its four-year average dividend yield is 1.45%. The company’s dividend payouts have grown at a CAGR of 149.8% over the past three years.

In terms of forward EV/Sales, CVE’s 0.95x is 51.8% lower than the industry average of 2.14x. Additionally, its 4.78x and 8.18x forward EV/EBITDA and EV/EBIT are 16.7% and 12.1% lower than the industry averages of 5.73x and 9.31x, respectively.

CVE’s revenues increased 9.3% year-over-year to C$13.40 billion ($9.78 billion) during the first quarter that ended March 31, 2024. Its earnings before income tax grew 162.1% year-over-year to C$1.55 billion ($1.14 billion). Its net earnings came in at C$1.18 billion ($861 million) and C$0.62 per common share, up 84.9% and 93.7% from the prior year’s quarter, respectively.

Furthermore, as of March 31, 2024, the company’s total current assets stood at C$10.84 billion ($7.91 billion) versus C$9.71 billion ($7.08 billion), respectively.

Analysts expect CVE’s revenue for the second quarter (ending June 2024) to increase 14.5% year-over-year to $11.13 billion, and its EPS for the ongoing quarter is expected to grow 120.1% year-over-year to $0.63. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 10.7% and 29.7% year-over-year to $42.89 billion and $2.07, respectively.

Shares of CVE have surged 14.3% over the past six months to close the last trading session at $18.79.

Based on 10 Wall Street analysts offering 12-month price targets for CVE in the last three months, the average price target is $24.53, indicating a 30.5% change from the last price, with a high forecast of $27.70 and a low forecast of $21.87.

CVE’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

CVE has a B grade for Growth, Sentiment, and Value. It is ranked #2 out of 80 stocks in the Energy - Oil & Gas industry.

In addition to the POWR Ratings we’ve stated above, we also have CVE ratings for Quality, Momentum, and Stability. Get all CVE ratings here.

DNOW Inc. (DNOW)

DNOW distributes downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities, and customer on-site locations in the United States, Canada, and internationally.

On March 12, 2024, DNOW announced it had completed its all-cash acquisition of Whitco Supply, LLC, after concluding the regulatory approval process and other customary closing conditions.

The acquisition of Whitco Supply strengthens DNOW's capabilities and position in the midstream, E&P, and targeted adjacent markets central to the company’s growth strategy while also boosting earnings and free cash flow capacity. This strategic capital deployment aligns with and reinforces DNOW's commitment to enhancing long-term value for shareholders and stakeholders.

In terms of forward EV/Sales, DNOW’s 0.52x is 70.4% lower than the industry average of 1.77x. Additionally, its 6.85x and 8.83x forward EV/EBITDA and EV/EBIT are 38.5% and 43.1% lower than the industry averages of 11.13x and 15.53x, respectively.

For the fiscal first quarter that ended March 31, DNOW’s revenue was reported at $563 million, while its operating profit stood at $28 million. Moreover, its non-GAAP EBITDA, excluding other costs, stood at $39 million.

For the same quarter, non-GAAP net income attributable to DNOW excluding other costs and non-GAAP earnings per share attributable to DNOW stockholders excluding other costs stood at $23 million and $0.21, respectively.

Analysts expect DNOW’s revenue for the second quarter ending June 2024, to increase 6.9% year-over-year to $634.67 million. The company’s EPS is expected to be $0.25 for the same quarter.

DNOW’s stock has gained 33.1% over the past year to close the last trading session at $13.27.

Based on two Wall Street analysts offering 12-month price targets for DNOW in the last three months, the average price target is $15.50, indicating a 16.8% upside, with a high forecast of $16 and a low forecast of $15.

DNOW’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Value and Quality. DNOW is ranked #7 out of 51 stocks in the Energy - Services industry.

Click here to access all DNOW ratings (Momentum, Sentiment, Growth, and Stability).

MRC Global Inc. (MRC)

MRC and its subsidiaries distribute pipes, valves, fittings, and other infrastructure products and services internationally. They offer ball, butterfly, gate, globe, check, diaphragm, needle, and plug valves among other products.

On April 2, 2024, MRC Global announced a strategic partnership with Engine Capital to bolster strategic oversight and foster growth initiatives. This partnership will leverage Engine Capital’s expertise to help MRC Global achieve its long-term goals and maximize shareholder returns.

In terms of forward EV/Sales, MRC’s 0.53x is 70.2% lower than the industry average of 1.77x. Additionally, its 7.36x and 9.67x forward EV/EBITDA and EV/EBIT are 34.2% and 37.7% lower than the industry averages of 11.17x and 15.52x, respectively.

For the fiscal first quarter that ended March 31, 2024, MRC’s sales and adjusted gross profit stood at $806 million and $174 million, respectively. Its adjusted EBITDA stood at $57 million. For the same quarter, its adjusted net income attributable to common stockholders and adjusted net income attributable to common stockholders per share stood at $17 million and $0.20, respectively.

For the quarter ending September 30, 2024, MRC’s EPS is expected to increase 3.9% year-over-year to $0.33. Its revenue for the quarter ending December 31, 2024, is expected to increase 8.2% year-over-year to $830.80 million.

Over the past year, MRC’s stock has gained 23% to close the last trading session at $12.26.

Based on three Wall Street analysts offering 12-month price targets for MRC in the last three months, the average price target is $16, indicating a 30.5% change from the last price.

MRC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. 

The stock has an A grade for Sentiment and Value. Within the same industry, MRC is ranked #2.

Click here to access additional ratings of MRC for Stability, Growth, Quality, and Momentum.

What To Do Next?

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3 Stocks to DOUBLE This Year >


CVE shares were trading at $18.60 per share on Friday afternoon, down $0.19 (-1.01%). Year-to-date, CVE has gained 13.70%, versus a 14.83% rise in the benchmark S&P 500 index during the same period.



About the Author: Nidhi Agarwal


Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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