Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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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3 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 3 undervalued stocks in the Oil & Gas - Exploration and Production industry for Thursday, August 01, 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.

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 65, which is considered to be undervalued.

When you look at CNX Resources Corp’s price-to-sales ratio at 3.35 compared to the industry median at 2.27, this company has a higher price relative to revenue compared to its peers. This could make CNX Resources Corp’s stock less attractive for value investors.

CNX Resources Corp’s price-earnings ratio is 7.97 compared to the industry median at 11.63. This means it has a lower share price relative to earnings compared to its peers. This could make CNX Resources Corp more attractive for value investors.

Now, let’s assess CNX Resources Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 9.6, when compared to the industry median of 5.5, the company may be considered overvalued 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. CNX Resources Corp’s shareholder yield is higher than its industry median ratio of 1.36%. 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. CNX Resources Corp’s price-to-book ratio is lower than its industry median ratio of 1.46. This could make CNX Resources Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at CNX Resources Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. CNX Resources Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 8.41. This could make CNX Resources Corp less attractive because the higher P/FCF ratio indicates that CNX Resources 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.

Kosmos Energy Ltd’s Value Grade

Value Grade:

Kosmos Energy Ltd. is a full cycle, deepwater, independent oil and gas exploration and production company focused along the offshore Atlantic Margins. Its key assets include production offshore Ghana, Equatorial Guinea and the United States Gulf of Mexico, as well as gas projects offshore Mauritania and Senegal. The Company has operations in four geographic reporting segments: Ghana, Equatorial Guinea, Mauritania/Senegal and the U.S. Gulf of Mexico. The West Cape Three Points and Deepwater Tano Blocks are located within the Tano Basin, offshore Ghana. This basin contains a petroleum system. The EG-01, EG-21, EG-24 and S blocks are located in the southern part of the Gulf of Guinea, in the Republic of Equatorial Guinea, west of the Rio Muni petroleum province. It covers approximately 7,500 square kilometers, and it has over 6,400 square kilometers of 3D seismic over the blocks. The C8 and BirAllah blocks are located on the western margin of the Mauritania Salt Basin offshore Mauritania.

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.

Kosmos Energy Ltd has a Value Score of 61, which is considered to be undervalued.

Kosmos Energy Ltd’s price-earnings ratio is 12.0 compared to the industry median at 11.6. This means that it has a higher price relative to its earnings compared to its peers. This makes Kosmos Energy Ltd less attractive for value investors.

Kosmos Energy Ltd’s price-to-book ratio is lower than its peers. This could make Kosmos Energy Ltd more attractive for value investors when compared to the industry median at 1.46.

You can read more about Kosmos 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.

Opal Fuels Inc’s Value Grade

Value Grade:

OPAL Fuels Inc. is a renewable energy company specializing in the capture and conversion of biogas for the production of renewable natural gas (RNG) for use as a vehicle fuel for heavy and medium-duty trucking fleets; generation of renewable power for sale to utilities; generation and sale of Environmental Attributes associated with RNG and Renewable Power, and sales of RNG as pipeline quality natural gas. Its RNG Fuel segment relates to all RNG supply directly related to the generation and sale of brown gas and environmental credits and consists of development and construction and RNG supply operating facilities. Through its Fuel Station Services segment, it provides construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities. Its Renewable Power portfolio segment generates renewable power and associated environmental credits through methane-rich landfills then sold to public utilities throughout the United States.

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.

Opal Fuels Inc has a Value Score of 66, which is considered to be undervalued.

Opal Fuels Inc’s price-earnings ratio is 5.6 compared to the industry median at 11.6. This means that it has a lower price relative to its earnings compared to its peers. This makes Opal Fuels Inc more attractive for value investors.

You can read more about Opal Fuels 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.

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 3 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.

• CNX Resources Corp stock has a Value Grade of B.
• Kosmos Energy Ltd stock has a Value Grade of B.
• Opal Fuels Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, August 01
• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Wednesday, July 31
• What You Need to Know About Hess Corp's Q2 Earnings
• Why LandBridge Co LLC’s (LB) Stock Is Up 5.74%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.