Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 stocks made the list for top value stocks in the Oil & Gas - Exploration and Production industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Oil & Gas - Exploration and Production Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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5 Undervalued Oil & Gas - Exploration and Production Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Oil & Gas - Exploration and Production industry for Wednesday, February 28, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Oil & Gas - Exploration and Production industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Baytex Energy Corp’s Value Grade

Value Grade:

Baytex Energy Corp. is a Canada-based energy company. The Company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States. Its crude oil and natural gas operations are organized into three main operating areas: Light Oil USA (Eagle Ford), Light Oil Canada (Pembina Duvernay / Viking) and Heavy Oil Canada (Peace River / Peavine / Lloydminster). Its Eagle Ford assets are located in the core of the liquids-rich Eagle Ford shale in South Texas. The Eagle Ford shale covers approximately 162,000 net acres of crude oil operations. Its Viking assets are located in the Dodsland area in southwest Saskatchewan and in the Esther area of southeastern Alberta. It also holds 100% working interest land position in the East Duvernay resource play in central Alberta.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Baytex Energy Corp has a Value Score of 86, which is considered to be undervalued.

When you look at Baytex Energy Corp’s price-to-sales ratio at 1.24 compared to the industry median at 2.00, this company has a lower price relative to revenue compared to its peers. This could make Baytex Energy Corp’s stock more attractive for value investors.

Baytex Energy Corp’s price-earnings ratio is 2.81 compared to the industry median at 7.57. This means it has a lower share price relative to earnings compared to its peers. This could make Baytex Energy Corp more attractive for value investors.

Now, let’s assess Baytex Energy Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 4.4, when compared to the industry median of 4.5, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Baytex Energy Corp’s shareholder yield is lower than its industry median ratio of 1.65%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Baytex Energy Corp’s price-to-book ratio is lower than its industry median ratio of 1.28. This could make Baytex Energy Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Baytex Energy Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Baytex Energy Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.38. This could make Baytex Energy Corp more attractive because the lower P/FCF ratio indicates that Baytex Energy Corp is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

CNX Resources Corp’s Value Grade

Value Grade:

CNX Resources Corporation is an independent low carbon intensity natural gas development, production, midstream and technology company centered in the Appalachian Basin. The majority of its operations are centered on unconventional shale formations, primarily the Marcellus Shale and Utica Shale, in Pennsylvania, Ohio and West Virginia. Additionally, it operates and develops Coalbed Methane (CBM) properties in Virginia. It has rights to extract natural gas from Shale formations in Pennsylvania, West Virginia, and Ohio from approximately 527,000 net Marcellus Shale acres and approximately 607,000 net Utica Shale acres. The Company holds approximately 53,000 acres of incremental Upper Devonian acres. It has rights to extract CBM in Virginia from approximately 278,000 net CBM acres. It extracts CBM natural gas primarily from the Pocahontas #3 seam. It has rights to extract natural gas from other Shale and shallow oil and gas formations, primarily in Illinois, Indiana, New York, and others.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

CNX Resources Corp has a Value Score of 80, which is considered to be undervalued.

CNX Resources Corp’s price-earnings ratio is 2.2 compared to the industry median at 7.6. This means that it has a lower price relative to its earnings compared to its peers. This makes CNX Resources Corp more attractive for value investors.

CNX Resources Corp’s price-to-book ratio is higher than its peers. This could make CNX Resources Corp less attractive for value investors when compared to the industry median at 1.28.

You can read more about CNX Resources Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Comstock Resources Inc’s Value Grade

Value Grade:

Comstock Resources, Inc. is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of oil and natural gas in the United States. The Company operates through the exploration and production of North American oil and natural gas segment. The Company primarily operates in the Haynesville shale, a natural gas basin located in North Louisiana and East Texas, with economic and geographical proximity to the Gulf Coast markets. The Company is focused on the development of drilling opportunities in the Haynesville and Bossier shales and exploration activities in Western Haynesville play. The Company has approximately 2,959 drilling locations on its Haynesville/Bossier shale acreage, where the Company estimates to have 4.9 trillion cubic feet equivalent (TCFE) of reserve potential. The Company owns interests in approximately 2,478 producing oil and natural gas wells (1,516.7 net) and operates 1,703 of these wells.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Comstock Resources Inc has a Value Score of 65, which is considered to be undervalued.

Comstock Resources Inc’s price-earnings ratio is 10.6 compared to the industry median at 7.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Comstock Resources Inc less attractive for value investors.

Comstock Resources Inc’s price-to-book ratio is higher than its peers. This could make Comstock Resources Inc less attractive for value investors when compared to the industry median at 1.28.

You can read more about Comstock Resources Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Epsilon Energy Ltd’s Value Grade

Value Grade:

Epsilon Energy Ltd. is an onshore natural gas production and midstream company with a focus on the Marcellus Shale of Pennsylvania. The Company is engaged in the acquisition, development, gathering and production of natural gas and oil reserves. The Company operates through three segments: Upstream, Gathering System, and Corporate. The Upstream segment's activities include acquisition, exploration, development and production of oil and natural gas reserves on properties within the United States. The Gathering System segment partners with two other companies to operate a natural gas gathering system. The Company has natural gas production in the Marcellus Shale in Pennsylvania, and oil, natural gas liquids and natural gas production in the Anadarko Basin in Oklahoma. The Company's subsidiaries include Epsilon Energy USA Inc., Epsilon Midstream, LLC, Epsilon Operating, LLC, Dewey Energy GP LLC, Dewey Energy Holdings, LLC, and Altolisa Holdings, LLC.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Epsilon Energy Ltd has a Value Score of 86, which is considered to be undervalued.

Epsilon Energy Ltd’s price-earnings ratio is 8.5 compared to the industry median at 7.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Epsilon Energy Ltd less attractive for value investors.

Epsilon Energy Ltd’s price-to-book ratio is higher than its peers. This could make Epsilon Energy Ltd less attractive for value investors when compared to the industry median at 1.28.

You can read more about Epsilon Energy Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Hugoton Royalty Trust’s Value Grade

Value Grade:

Hugoton Royalty Trust is an express trust, which is created pursuant to the Trust Indenture between XTO Energy Inc. (XTO Energy). Its properties are gas-producing properties located in the Hugoton area of Oklahoma and Kansas, the Anadarko Basin of Oklahoma and the Green River Basin of Wyoming. XTO Energy operates approximately 95% of the underlying properties. The Company's Hugoton area is a domestic natural gas producing area. XTO Energy is a producer in the Ringwood, Northwest Okeene and Cheyenne Valley fields of County, the Northeast Cedardale field of Woodward County and the Elk City field of Beckham County, the principal producing regions of the properties in the Anadarko Basin. The Green River Basin is located in southwestern Wyoming. XTO Energy is a wholly owned subsidiary of Exxon Mobil Corporation.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hugoton Royalty Trust has a Value Score of 99, which is considered to be undervalued.

Hugoton Royalty Trust’s price-earnings ratio is 1.2 compared to the industry median at 7.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Hugoton Royalty Trust more attractive for value investors.

You can read more about Hugoton Royalty Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Oil & Gas - Exploration and Production Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Oil & Gas - Exploration and Production stocks as well as other industrys.

Choosing Which of the 5 Best Oil & Gas - Exploration and Production Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Baytex Energy Corp stock has a Value Grade of A.
• CNX Resources Corp stock has a Value Grade of B.
• Comstock Resources Inc stock has a Value Grade of B.
• Epsilon Energy Ltd stock has a Value Grade of A.
• Hugoton Royalty Trust stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 undervalued stocks in the Oil & Gas - Exploration and Production industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Oil & Gas - Exploration and Production Stocks

Want to learn more about Oil & Gas - Exploration and Production stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 5 Undervalued Oil & Gas - Exploration and Production Stocks for Wednesday, February 28
• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Tuesday, February 27
• What You Need to Know About Devon Energy Corp's Q4 Earnings
• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Monday, February 26

AAII Disclaimer

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