It is an ugly day in the market as the market finally reacts to the unfolding crisis in Greece and the ramifications for the European continent. Oil continues to take it in the shorts and the pain in the energy sector continues. However, some real bargains are starting to become available for long term investors. One stock that reported earnings today, Statoil (STO), looks like a compelling value here, especially for investors who want low valuations, growing production and a high dividend yield.
Key Highlights from Statoil earnings report
- Production was up 11% Y/Y.
- Earnings were down only because last year's first-quarter earnings were boosted by the sale of a 40-percent stake in the Kai Kos Dehseh oil sands project and higher taxes this quarter.
- Statoil said it aims to reach an equity production above 2.5 million barrels of oil equivalent in 2020 as new projects come on stream
Statoil - "Statoil ASA, an integrated energy company, engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products in Norway and internationally". (Business Description from Yahoo Finance)
4 reasons STO has long term value at just over still $25 a share:
- The stock is yielding 3.7% and has a payout ratio of around 30%.
- Consensus earnings estimates for FY2012 and FY2013 have risen solidly over the past two months.
- The stock is cheap given its dividend yield at around 8 times forward earnings and a five year projected PEG of just over 1 (1.14).
- The five analysts that cover the stock have a median target of $30 on Statoil. It also just completed a very smart deal with Russia on a massive exploration opportunity there.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STO over the next 72 hours.