Jim Cramer is co-founder of the TheStreet.com, which lists top stocks in each industry day by day. I have investigated these stocks from a fundamental perspective, adding my O-Metrix Grading System where possible. Here is a fundamental analysis on the five best Oil & Gas stocks picked by The Street:
Stock | Ticker | O-Metrix Score | My Take |
Chevron Corp. | (NYSE:CVX) | 5.06 | Buy |
PetroChina Ltd. | (NYSE:PTR) | 12.24 | Buy |
Ecopetrol | (NYSE:EC) | 8.78 | Buy |
Statoil ASA | (NYSE:STO) | 3.75 | Hold |
ConocoPhillips | (NYSE:COP) | 7.24 | Buy |
Data obtained from Finviz/Morningstar and current as of Sept. 1.
Ecuador is to pay a $96 million penalty to Chevron Corp. The oil titan was trading at a P/E ratio of 8.6, and a forward P/E ratio of 7.5, as of the Sept. 1 close. Analysts estimate a 5.0% annualized EPS growth for the next five years, which is reasonable when its 7.69% EPS growth of last five years is considered. With a profit margin of 9.9%, shareholders enjoyed a 3.16% dividend last year.
Earnings increased by 42.73% this quarter, and 80.93% this year. It has an O-Metrix score of 5.06, while target price indicates a 17.4% upside potential. Institutions own 64.53% of the stock. Chevron returned 29.9% in the last twelve months, and it is currently trading 8.18% lower than its 52-week high. Debts are far from being a threat. Operating margin is 17.2%, and debt-to-equity ratio is 0.1, both of which are way better than their industry averages. Sales rose by 30.08% this quarter. Chevron is an excellent pick to go long.
PetroChina is planning to add a 1 million tonne per year gasoline hydrotreating unit in Oct,2011. As of Sept. 1, the Beijing-based PetroChina shows a trailing P/E ratio of 10.7, and a forward P/E ratio of 9.0. Estimated annualized EPS growth for the next five years is 20.6%, which is possible given China’s increasing demand for energy. With a profit margin of 8.1%, PetroChina offered a 3.53% dividend last year.
The company had an EPS growth of 35.41% this year, and 38.32% this quarter. Its O-Metrix score is 12.24, whereas it returned 15.2% in a year. Target price implies a 15.3% upside movement potential, while it is trading 16.44% lower than its 52-week high. Assets outrun debts. Debt-to-equity ratio is 0.2, far better than the industry average of 0.6. 13 out of 28 analysts covering the company recommends buying. Moreover, it has a four-star rating from Morningstar. Returning large profits is no sweat for PetroChina in the long term.
Ecopetrol has recently announced its quarterly earning results. The company has a 19.38 P/E ratio, and a 11.9 forward P/E ratio, as of Sept. 1. Five-year annual EPS growth forecast is 22.6%, which is overdone when its -14.04% EPS growth of past five years is considered. EcoPetrol offered a 4.88% dividend last year, while the profit margin (21.7%) nearly triples the industry average of 7.1%.
Earnings increased by 112.30% this quarter and 43.59% this year. Sales rose by 58.80% this quarter. O-Metrix score of the company is 8.78. Target price implies a 6.4% upside potential, while it is trading 12.47% lower than its 52-week high. The company returned 8.3% in the last twelve months. Assets and debts are increasing sharply. Operating margin (35.3%), ROE (29.6%) and debt-to-equity ratio (0.2) are solid green flags. SMA20, SMA50, and SMA200 are 6.27%, 5.08% and 5.65%, respectively. Institutional transactions have increased by 53.36% in the last three months. I would not ignore this stock.
Statoil just discovered a gas reservoir in the Norwegian North Sea. Statoil was trading at a P/E ratio of 9.6, and a forward P/E ratio of 6.9, as of the Sept. 1 close. Analysts expect the company to have a 2.3% annualized EPS growth in the next five years. Profit margin (7.8%) is slightly better than the industry average of 7.1%, while it paid a 3.90% dividend last year.
The company had a whopping EPS growth of 643.11% this quarter, and 108.04% this year. While SMA50 is 1.53%, SMA200 is 0.32%. Target price is $26.93, which indicates an about 11.4% increase potential. O-Metrix score is 3.75. The stock is trading 14.97% lower than its 52-week high, and it returned 21.5% in a year. Debt-to-assets ratio is slowly decreasing since Q3 2010. ROE and ROI are 19.40% and 13.05%, respectively. Operating margin is 26.9%, which crushes its industry average of 13.6%. Analysts could not come to an agreement about Statoil. Out of 31 analysts, 9 of them recommend buying, 7 suggest outperform, 9 recommend holding, 2 suggest underperform and the last three of them recommend selling. I would hold if I owned it, but buying would not be wise, in my opinion.
ConocoPhillips is a top pick of Mad Money host Jim Cramer. The Texas-based ConocoPhillips, as of the Sept. 1 close, has an impressive P/E ratio of 8.6, and a forward P/E ratio of 7.8. Analysts estimate an 8.0% annual EPS growth for the next five years. Profit margin in 2010 was 5.1%, while it offered a 3.88% dividend.
Earnings increased by 28.09% this year, and sales rose by 33.58% this quarter. O-Metrix score of the company is 7.24, and it is currently trading 14.73% lower than its 52-week high. Target price is $83.37, indicating a 21.6% increase potential. Institutions hold 73.18% of the stock. The company returned 25.7% in the last five years, and yields are consistent. Debt-to-assets ratio is slightly decreasing for the last five quarters. Debt-to equity ratio is 0.3, and P/S is 0.4, both of which are way better than their industry averages. Moreover, it has a five-star rating from Morningstar. This is a stock worth adding to your retirement portfolio.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.