Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 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 4 undervalued stocks in the Oil & Gas - Exploration and Production industry for Monday, June 24, 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 83, which is considered to be undervalued.

When you look at Baytex Energy Corp’s price-to-sales ratio at 0.88 compared to the industry median at 2.32, 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.

Now, let’s assess Baytex Energy Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 2.8, when compared to the industry median of 5.4, 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 1.64%. 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 1.44. 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 8.45. 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.

Civitas Resources Inc’s Value Grade

Value Grade:

Civitas Resources, Inc. is an independent, domestic oil and gas producer focused on development of its assets in the Denver-Julesburg (DJ) and Permian Basins. The Company’s operations are focused along the Denver-Julesburg (DJ), Delaware and Midland Basins. Its development facilities are located in counties across the Front Range of northern and central Colorado, as well as Southeastern New Mexico and West Texas. Its acreage position in the DJ Basin is about 453,600 net acres and, in the Permian Basin, it is about 68,500 net acres. The Company has a total production of about 280,000 barrels of oil equivalent (BOE).

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.

Civitas Resources Inc has a Value Score of 77, which is considered to be undervalued.

Civitas Resources Inc’s price-earnings ratio is 8.2 compared to the industry median at 11.1. This means that it has a lower price relative to its earnings compared to its peers. This makes Civitas Resources Inc more attractive for value investors.

Civitas Resources Inc’s price-to-book ratio is higher than its peers. This could make Civitas Resources Inc less attractive for value investors when compared to the industry median at 1.44.

You can read more about Civitas 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.

Granite Ridge Resources Inc’s Value Grade

Value Grade:

Granite Ridge Resources, Inc. is an oil and gas exploration and production company. It owns a portfolio of wells and top-tier acreage across the Permian and four other prolific unconventional basins across the United States. It holds interests in wells in core operating areas of the Permian, Eagle Ford, Bakken, Haynesville and Denver-Julesburg (DJ) plays. It owns an interest in approximately 2,826 gross (176.50 net) producing wells, 309,472. The Permian Basin extends from southeastern New Mexico into west Texas. The Permian Basin consists of mature legacy onshore oil and liquids-rich natural gas reservoirs. The Eagle Ford shale formation stretches across south Texas and includes Austin Chalk and Buda formations. The Williston Basin stretches through North Dakota, the northwest part of South Dakota, and eastern Montana. The Haynesville Basin is a premier natural gas basin located in Northwestern Louisiana and East Texas. The DJ basin is a geologic basin centered in eastern Colorado.

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.

Granite Ridge Resources Inc has a Value Score of 90, which is considered to be undervalued.

Granite Ridge Resources Inc’s price-earnings ratio is 13.1 compared to the industry median at 11.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Granite Ridge Resources Inc less attractive for value investors.

Granite Ridge Resources Inc’s price-to-book ratio is higher than its peers. This could make Granite Ridge Resources Inc less attractive for value investors when compared to the industry median at 1.44.

You can read more about Granite Ridge 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.

Paramount Resources Ltd’s Value Grade

Value Grade:

Paramount Resources Ltd. is a Canada-based energy company. The Company explores and develops both conventional and unconventional petroleum and natural gas. It also pursues longer-term strategic exploration and pre-development plays and holds a portfolio of investments in other entities. Its principal properties are located in Alberta and British Columbia. The Company's operations are organized into three regions: the Grande Prairie Region, located in the Peace River Arch area of Alberta, which is focused on Montney developments at Karr and Wapiti; the Kaybob Region, located in west-central Alberta, which includes the Kaybob North Duvernay development, the Kaybob North Montney oil development and other shale gas and conventional natural gas producing properties, and the Central Alberta and Other Region, which includes the Willesden Green Duvernay development in central Alberta and shale gas producing properties in the Horn River Basin in northeast British Columbia.

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.

Paramount Resources Ltd has a Value Score of 76, which is considered to be undervalued.

Paramount Resources Ltd’s price-earnings ratio is 13.0 compared to the industry median at 11.1. This means that it has a higher price relative to its earnings compared to its peers. This makes Paramount Resources Ltd less attractive for value investors.

Paramount Resources Ltd’s price-to-book ratio is higher than its peers. This could make Paramount Resources Ltd less attractive for value investors when compared to the industry median at 1.44.

You can read more about Paramount Resources 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.

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 4 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.
• Civitas Resources Inc stock has a Value Grade of B.
• Granite Ridge Resources Inc stock has a Value Grade of A.
• Paramount Resources Ltd stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Oil & Gas - Exploration and Production Stocks for Monday, June 24
• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Friday, June 21
• Why TXO Partners LP’s (TXO) Stock Is Up 4.10%
• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, June 20

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