Looking to invest in the oil and gas sector, but don't know where to start? If so, you might be interested in our list below.
Profitability is a very important consideration when choosing stocks among any sector, especially a complicated one such as the oil and gas sector.
With this in mind, we screened for stocks in the oil and gas sector, then analyzed sources of profitability using the DuPont formula.
The DuPont formula uses return on equity (ROE) for its profitability measurement. The higher the ROE, the more profitable the company appears, but this profitability can come from many sources -- some better than others.
In general, an encouraging DuPont breakdown implies one or more of the following:
-Improving Net Profit Margin, i.e., higher Net Income/ Revenues
-Improving Asset Efficiency, i.e., higher Sales/Assets
-Decreasing Financial Leverage ratio, i.e., lower Assets/Equity
Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.
For an interactive version of this chart, click on the image below. Tool provided by Kapitall, analyst ratings sourced from Zacks Investment Research.
Use this list as a starting-off point for your own analysis.
1. Helmerich & Payne Inc. (HP): Engages in the contract drilling of oil and gas wells in the United States and internationally. Market cap at $6.02B, most recent closing price at $56.98. MRQ net profit margin at 18.94% vs. 17.33% y/y. MRQ sales/assets at 0.145 vs. 0.14 y/y. MRQ assets/equity at 1.492 vs. 1.53 y/y.
2. Sunoco Logistics Partners L.P. (SXL): Engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States. Market cap at $5.27B, most recent closing price at $50.92. MRQ net profit margin at 4.16% vs. 3.33% y/y. MRQ sales/assets at 0.594 vs. 0.515 y/y. MRQ assets/equity at 4.241 vs. 5.116 y/y.
3. Transmontaigne Partners L.P. (TLP): Operates as a terminalling and transportation company. Market cap at $532.13M, most recent closing price at $36.80. MRQ net profit margin at 25.34% vs. 20.68% y/y. MRQ sales/assets at 0.079 vs. 0.072 y/y. MRQ assets/equity at 1.397 vs. 1.47 y/y.
4. Alon USA Energy, Inc. (ALJ): Operates as an independent refiner and marketer of petroleum products in south central, southwestern, and western regions of the United States. Market cap at $880.45M, most recent closing price at $14.37. MRQ net profit margin at 1.83% vs. 1.39% y/y. MRQ sales/assets at 1.017 vs. 0.85 y/y. MRQ assets/equity at 5.091 vs. 5.812 y/y.
5. Calumet Specialty Products Partners LP (CLMT): Produces and sells specialty hydrocarbon products in North America. Market cap at $1.82B, most recent closing price at $31.69. MRQ net profit margin at 3.6% vs. 2.52% y/y. MRQ sales/assets at 0.527 vs. 0.474 y/y. MRQ assets/equity at 2.64 vs. 2.991 y/y.
* Profitability data sourced from Fidelity. All other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.