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 Tuesday, August 06, 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.

Coterra Energy Inc’s Value Grade

Value Grade:

Coterra Energy Inc. is an independent oil and gas company. The Company is engaged in the development, exploration and production of oil, natural gas and natural gas liquids (NGLs). Its operations are primarily concentrated in three core operating areas: the Permian Basin in west Texas and southeast New Mexico, the Marcellus Shale in northeast Pennsylvania and the Anadarko Basin in the Mid-Continent region in Oklahoma. Its Permian Basin properties hold approximately 296,000 net acres in its core operating area in the Delaware Basin. Its Marcellus Shale properties hold approximately 186,000 net acres in the dry gas window of the Marcellus Shale. The Anadarko Basin properties hold approximately 182,000 net acres and its development activities are primarily focused on both the Woodford Shale and the Meramec formations. It sells oil, natural gas and NGLs to industrial customers, local distribution companies, oil and gas marketers, pipeline companies and power generation facilities.

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.

Coterra Energy Inc has a Value Score of 75, which is considered to be undervalued.

When you look at Coterra Energy Inc’s price-to-sales ratio at 3.10 compared to the industry median at 2.06, this company has a higher price relative to revenue compared to its peers. This could make Coterra Energy Inc’s stock less attractive for value investors.

Coterra Energy Inc’s price-earnings ratio is 13.56 compared to the industry median at 10.44. This means it has a higher share price relative to earnings compared to its peers. This could make Coterra Energy Inc less attractive for value investors.

Now, let’s assess Coterra Energy Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 6.3, when compared to the industry median of 5.6, 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. Coterra Energy Inc’s shareholder yield is higher than its industry median ratio of 1.52%. 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. Coterra Energy Inc’s price-to-book ratio is higher than its industry median ratio of 1.32. This could make Coterra Energy Inc fairly attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Coterra Energy Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Coterra Energy Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.67. This could make Coterra Energy Inc more attractive because the lower P/FCF ratio indicates that Coterra Energy Inc 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.

Magnolia Oil & Gas Corp’s Value Grade

Value Grade:

Magnolia Oil & Gas Corporation is an independent oil and natural gas company, which acquires, develops, explores and produces oil, natural gas and natural gas liquid (NGL) reserves. The Company’s oil and natural gas properties are located primarily in the Karnes and Giddings areas in South Texas, where the Company targets the Eagle Ford Shale and Austin Chalk formations. The Company’s assets consist of a total leasehold position of 789,719 gross (576,504 net) acres, including 72,503 gross (50,681 net) acres in the Karnes area and 717,216 gross (525,823 net) acres in the Giddings area. The Karnes area consists of oil and natural gas assets primarily located in Karnes, Dimmit, Gonzales, and Zavala Counties, Texas, in the core of the Eagle Ford Shale. The acreage comprising the Karnes area also includes the Austin Chalk formation overlying the Eagle Ford Shale. The Giddings Assets are located in Brazos, Burleson, Fayette, Grimes, Lee, Milam, Robertson and Washington Counties, Texas.

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.

Magnolia Oil & Gas Corp has a Value Score of 64, which is considered to be undervalued.

Magnolia Oil & Gas Corp’s price-earnings ratio is 11.5 compared to the industry median at 10.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Magnolia Oil & Gas Corp less attractive for value investors.

Magnolia Oil & Gas Corp’s price-to-book ratio is lower than its peers. This could make Magnolia Oil & Gas Corp more attractive for value investors when compared to the industry median at 1.32.

You can read more about Magnolia Oil & Gas 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.

Permian Resources Corp’s Value Grade

Value Grade:

Permian Resources Corporation is an independent oil and natural gas company. The Company is focused on the acquisition, optimization and development of oil and natural gas properties. The Company’s assets and operations are concentrated in the core of the Delaware Basin. Its operations are concentrated in the core of the Delaware Basin and include over 407,000 net leasehold acres across the Permian Basin, including Eddy and Lea Counties, New Mexico and Reeves and Ward Counties, Texas. The Company holds an 83% average working interest in 2,577 gross (2,143 net) operated productive wells and an approximate 11% average working interest in 1,094 gross (120 net) non-operated productive wells. Its wells are primarily oil wells (3,150 gross) that produce associated liquids-rich natural gas.

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.

Permian Resources Corp has a Value Score of 64, which is considered to be undervalued.

Permian Resources Corp’s price-earnings ratio is 12.2 compared to the industry median at 10.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Permian Resources Corp less attractive for value investors.

Permian Resources Corp’s price-to-book ratio is higher than its peers. This could make Permian Resources Corp less attractive for value investors when compared to the industry median at 1.32.

You can read more about Permian 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.

Permianville Royalty Trust’s Value Grade

Value Grade:

Permianville Royalty Trust (the Trust) is a statutory trust formed by Enduro Resource Partners LLC (Enduro), as trustor, The Bank of New York Mellon Trust Company, N.A. (the Trustee), as trustee, and Wilmington Trust Company (the Delaware Trustee), as Delaware Trustee. The Trust is created to acquire and hold for the benefit of the Trust unitholders a net profits interest representing the right to receive approximately 80% of the net profits from the sale of oil and natural gas production from certain properties in the states of Texas, Louisiana and New Mexico held by Enduro. The properties in which the Trust holds the Net Profits Interest are referred to as the Underlying Properties. The Company’s Underlying Properties consist of producing and non-producing interests in oil and natural gas units, wells and lands in Texas, Louisiana and New Mexico. The Underlying Properties are divided into two geographic regions: the Permian Basin region and East Texas/North Louisiana region.

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.

Permianville Royalty Trust has a Value Score of 83, which is considered to be undervalued.

Permianville Royalty Trust’s price-earnings ratio is 5.4 compared to the industry median at 10.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Permianville Royalty Trust more attractive for value investors.

Permianville Royalty Trust’s price-to-book ratio is higher than its peers. This could make Permianville Royalty Trust less attractive for value investors when compared to the industry median at 1.32.

You can read more about Permianville 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 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.

• Coterra Energy Inc stock has a Value Grade of B.
• Magnolia Oil & Gas Corp stock has a Value Grade of B.
• Permian Resources Corp stock has a Value Grade of B.
• Permianville Royalty Trust stock has a Value Grade of A.

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 Tuesday, August 06
• Which Is a Better Investment, Chesapeake Energy Corp or Highpeak Energy Inc Stock?
• Which Is a Better Investment, Chesapeake Energy Corp or Veren Inc Stock?
• 7 Undervalued Oil & Gas - Exploration and Production Stocks for Monday, August 05

AAII Disclaimer

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