Thanks to the surprise production cuts from the alliance between the Organization of the Petroleum Exporting Countries (OPEC) and non-member oil-producing nations — known as OPEC+ — oil stocks to buy suddenly got extremely compelling. Further, a key question sprouted regarding future monetary policy.
Yes, the Federal Reserve now has the motivation to raise interest rates even higher. At the same time, the latest data from the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) indicates that employment opportunities decelerated conspicuously. If the central bank tightens the monetary supply again, a sharp recession may materialize.
Either way, as society normalizes from the Covid-19 pandemic, demand for hydrocarbons will only increase. Therefore, the below oil stocks to buy should be quite compelling.
Based in Houston, Texas, Coterra Energy (NYSE:CTRA) engages in hydrocarbon exploration. Per its public profile, Coterra has operations in the Permian Basin, Marcellus Shale and the Anadarko Basin. Since the start of the new year, CTRA gained over 7% of equity value. In the trailing 365 days, it dipped more than 13%. Still, CTRA could be one of the intriguing oil stocks to buy.
Mainly, the company enjoys an overall solid financial framework. On the balance sheet, Coterra’s equity-to-asset ratio is 0.63 times, ranked better than 67.61% of companies in the oil and gas industry. Also, its Altman Z-Score pings at 3.22, indicating modestly low risk of bankruptcy in the next two years.
Operationally, Coterra prints an outstanding three-year revenue growth rate of 31.8%. Also, its net margin is 44.91%, blowing past nearly 92% of its peers. Finally, Wall Street analysts peg CTRA as a consensus moderate buy. Their average price target stands at $30.62, implying nearly 23% upside potential.
Valero Energy (VLO)
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A downstream petroleum firm, Valero Energy (NYSE:VLO) is mostly involved in manufacturing and marketing transportation fuels and other petrochemical products. Among the most enticing oil stocks to buy, since the start of the year, VLO gained nearly 11% of equity value. In the trailing one-year period, VLO swung up more than 28%.
On the balance sheet, Valero features a debt-to-EBITDA ratio of 0.69, favorably below the sector median value of 1.65. Its Altman Z-Score pings at 5.58, reflecting very low risk of bankruptcy. Operationally, the company’s three-year revenue growth rate hits 19.4%, ranked above 72.84% of other oil stocks to buy.
Moreover, the market prices VLO at a trailing multiple of 4.55. As a discount to earnings, Valero ranks better than 70.75% of its peers. Lastly, covering analysts peg VLO as a consensus strong buy. Their average price target stands at $163.93, implying nearly 24% upside potential.
Devon Energy (DVN)
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Headquartered in Oklahoma City, Oklahoma, Devon Energy (NYSE:DVN) engages in hydrocarbon exploration in the U.S. Presently, it’s one of the underrated energy stocks to buy with strong upside potential. Since the start of the year, DVN dipped 9%. In the past 365 days, shares have been volatile, losing over 15% of equity value.
Despite the red ink, Gurufocus notes that Devon features four good signs with no other particularly worrying signals. On the balance sheet, Devon’s Altman Z-Score pings at 3.91, indicating modestly low risk of bankruptcy. Operationally, the company prints a strong three-year revenue growth rate of 23.7%. Also, its net margin comes in at 31.38%, outpacing 83% of the competition.
Notably, the market prices DVN at a trailing multiple of 5.8. As a discount to earnings, Devon ranks better than 61.94% of other oil stocks to buy. In closing, analysts peg DVN as a consensus moderate buy. Their average price target stands at $67.88, implying over 28% upside potential.
Magnolia Oil & Gas (MGY)
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Based in Houston, Magnolia Oil & Gas (NYSE:MGY) tends to fly under the radar compared to other oil stocks to buy. Interestingly, since the Jan. opener, MGY gained less than 1% of its market value. In the trailing one-year period, it shed nearly 13%. Still, investors may want to keep close tabs on this enticing opportunity.
Financially, Magnolia benefits from a robust balance sheet. Up top, its cash-to-debt ratio pings at 1.73 times, better than 65.67% of its rivals. Also, its Altman Z-Score hits 5.83, indicating very low bankruptcy risk. Operationally, the company posts a solid three-year revenue growth rate of 16.9%. Also, its net margin stands at 52.75%, above almost 94% of other oil stocks to buy.
Conspicuously, the market prices MGY at a trailing multiple of 4.74. As a discount to earnings, Magnolia ranks better than 69.4% of sector players. Turning to Wall Street, analysts peg MGY as a consensus strong buy. Their average price target comes out to $29.21, indicating nearly 31% upside potential.
Chord Energy (CHRD)
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Headquartered in Houston, but operating in North Dakota and Montana, Chord Energy (NASDAQ:CHRD) might not be the most popular name among oil stocks to buy. However, its hydrocarbon exploration and hydraulic fracking businesses command a relevant profile. Since the beginning of this year, CHRD gained more than 5%, a modest return. In the trailing year, it’s down more than 6%.
Still, astute investors might take a shot on CHRD because of its attractive financials. First, on the balance sheet, Chord features a cash-to-debt ratio of 1.21 times. In contrast, the sector median value is only 0.53 times. As well, its equity-to-asset ratio is 0.71, beating out 76.4% of its peers. Second, it’s profitable. On the bottom line, the net margin comes out to 50.9%, outpacing most competitors.
Interestingly, CHRD trades at 2.98 times FCF. As a discount to the underlying metric, Chord ranks better than 81.66% of rivals. Looking to the Street, analysts peg CHRD as a unanimous strong buy. Their average price target stands at $185.33, implying over 33% upside potential.
Cenovus Energy (CVE)
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An integrated oil and natural gas company, Canadian energy giant Cenovus Energy (NYSE:CVE) is one of its nation’s biggest companies in the underlying industry. However, it’s only just starting to make good of this status this year. Since the Jan. opener, CVE dipped almost 3%. Still, in the trailing one-year period, it gained a little over 1%.
Those seeking compelling oil stocks to buy should give Cenovus serious consideration. First, the company benefits from a decent balance sheet. For example, its debt-to-EBITDA ratio is 0.84 times, ranked better than 68.27% of sector players. Operationally, the company prints an excellent three-year revenue growth rate of 26.5%. Also, its net margin comes in at 8.99%.
Notably, CVE trades at 0.67-times trailing sales. As a discount to revenue, Cenovus ranks better than 62.18% of the competition. Finally, analysts peg CVE as a unanimous strong buy. Their average price target stands at $23.93, implying almost 35% upside potential.
Matador Resources (MTDR)
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Headquartered in Dallas, Texas, Matador Resources (NYSE:MTDR) is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the U.S. Since the Jan. opener, MTDR declined by 5%. In the past 365 days, shares slipped more than 9% of equity value.
Still, it could be an intriguing idea among energy stocks to buy, mainly because it’s quite underrated. First, it enjoys a decent balance sheet, with an Altman Z-Score of 3.56. On the operational front, though, the company really comes alive. Matador’s three-year revenue growth rate pings at 44.7%, outpacing 91.25% of other oil and gas companies. On the bottom line, the firm’s net margin is just under 40%, outpacing 89.2% of the competition.
Enticingly, the market prices MTDR at a forward multiple of 5.6. As a discount to earnings, Matador ranks better than 69.07% of the field. Lastly, analysts peg MTDR as a consensus strong buy. Their average price target stands at $71.60, implying nearly 42% upside potential.
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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
