This Experienced Oil Stock has Great Upside Potential

Jay Peroni, Lead Analyst, CEO and FounderBlog (Members), Blog (Public), Growth & Income, Jay Stock Review

Oil Stocks to Have a Great 2017?

 

Though it will not be straight upward climb for energy companies, 2017 should be a much better year for the energy sector. Even though there may be some short-term challenges as oil prices fluctuate, I still see $60-$70+ oil prices by the end of 2017.

The world appetite for energy continues surging. Analysts project that global energy needs will be 50% higher in 2030 than they are now showing the tremendous growth over the next 10-15 years.  The economies of China and India will contribute 45% of that increase. Therefore, some economists and Wall Street analysts have become quite bullish about the long-term outlook for energy investments.

I’m very excited about the energy sector’s prospects over the next several months and years. The stock market and energy sector will have its peaks and valleys along the way, but I particularly like the prospects for the energy sector because of the rough year this sector had in 2016. The tough times in 2016 should set up for improvement in 2017 and thus higher stock prices for energy related companies.

Today’s investment idea takes a look at a solid energy company worth a closer look.

Solid Independent Oil Producer

Company:                 Pioneer Natural Resources (PXD)

Industry:                   Independent Oil & Gas

Sector:                        Energy

Profile: Pioneer Natural Resources is an oil and gas exploration and production company with ownership interests in oil and gas properties located in the United States, Argentina, Canada, South Africa and Gabon. The company provides administrative, financial and management support to United States and foreign subsidiaries that explore for, develop and produce oil, natural gas liquid and natural gas reserves.

Chart:


Reasons to Buy

  • Pioneer has focusing intently on the development of its liquids-rich acreage.  This has allowed it to do what it does best.
  • Pioneer is a skilled operator with strong margins and returns and is skilled at managing price inflation.
  • It holds more than a decades experience of low-risk, high-return inventory. This is spread across a handful of leading plays in the United States.
  • Cash flows from Pioneer’s legacy dry gas assets should help it further fund development of its acreage.

5 Point Stock Inspection

  1. Earnings Trend: Grade A
  • Solid earnings growth (greater than 20% year over year)
  • Positive Analyst Earnings Revisions
  • Earnings growth last quarter greater than 20% over same quarter last year
  1. Financial Health: Grade B
  • Stronger financial profile than 32.73% of stock universe
  • Operating profit in current year is greater than the previous year
  • Free cash flow has been growing for three straight years
  • Operating profit margin greater than industry average
  1. Momentum: Grade A
  • Strong Momentum: Stock in top 30% of all stocks.
  • Relative Strength is 80 out of 100
  • Stock up over 50% over the past 12 months
  1. Risk: Grade A
  • Higher risk
  • Beta tin line with that of the market (1.01)
  • Has lower risk profile than just 41.09% of stock universe
  1. Valuation: Grade C
  • P/E less than industry average
  • Current P/E is less than industry average.
  • Forward P/E at 94.66 is high compared to industry average.
  • Good buy under $190/share

Overall:  Grade A

Bottom Line

Pioneer Natural Resources (PXD) is a solid choice if you are looking to gain energy exposure and want a solid company with great upside potential.

 

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Disclaimer

While Dual Returns has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.