Are you looking for mid-sized companies that still have room to grow? Interested in gaining exposure to oil & gas companies? Do you prefer stocks that analysts rate as 'Buy', or better? Looking for undervalued stocks? If so, here are some interesting ideas for you.
The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
We first looked for mid cap oil & gas stocks. We next screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). From here, we then looked for companies that are undervalued when company growth rate is taken into account (PEG Ratio < 1)(P/E<10).
Do you think these mid-cap stocks have a strong outlook? Use this list as a starting-off point for your own analysis.
1) Linn Energy, LLC (LINE)
| Sector: | Basic Materials |
| Industry: | Independent Oil & Gas |
| Market Cap: | $7.51B |
| Beta: | 0.70 |
Linn Energy, LLC has an analysts' rating of 1.50 and Price/Earnings to Growth Ratio of 0.89 and Price/Earnings Ratio of 7.53. The short interest was 0.98% as of 05/14/2012. Linn Energy, LLC, an independent oil and natural gas company, engages in the acquisition and development of oil and gas properties. The company's properties are primarily located in the Mid-Continent, the Permian Basin, Michigan, California, and the Williston Basin in the United States. As of December 31, 2011, it had proved reserves of 3,370 billion cubic feet equivalent of oil and gas, and natural gas liquids, as well as operated 7,759 gross productive wells.
2) Chesapeake Energy Corporation (CHK)
| Sector: | Basic Materials |
| Industry: | Independent Oil & Gas |
| Market Cap: | $9.81B |
| Beta: | 1.28 |
Chesapeake Energy Corporation has a analysts' rating of 2.40 and Price/Earnings to Growth Ratio of 0.75 and Price/Earnings Ratio of 6.12. The short interest was 10.21% as of 05/14/2012. Chesapeake Energy Corporation engages in the acquisition, exploration, development, and production of natural gas and oil properties in the United States. The company also offers marketing, midstream, drilling, and other oilfield services. It holds interests in various natural gas resources, including the Haynesville and Bossier Shales in northwestern Louisiana and East Texas; the Marcellus Shale in the northern Appalachian Basin of West Virginia and Pennsylvania; the Barnett Shale in the Fort Worth Basin of north-central Texas; and the Pearsall Shale in South Texas.
3) Newfield Exploration Co. (NFX)
| Sector: | Basic Materials |
| Industry: | Independent Oil & Gas |
| Market Cap: | $4.35B |
| Beta: | 1.40 |
Newfield Exploration Co. has a Analysts' Rating of 2.20 and Price/Earnings to Growth Ratio of 0.76 and Price/Earnings Ratio of 6.48. The short interest was 4.03% as of 05/14/2012. Newfield Exploration Company, an independent energy company, engaged in the exploration, development, and production of crude oil, natural gas, and natural gas liquids. It has operations in the Mid-Continent, the Rocky Mountains, and onshore Texas, as well as in Malaysia and China. As of December 31, 2011, the company owned interests in approximately 825,000 net acres in the Rocky Mountains; approximately 480,000 net acres in the Mid-Continent; approximately 317,000 net acres in Maverick, Dimmit, and Zavala counties, Texas; approximately 147,000 net acres in conventional onshore Texas plays; and in 91 deepwater leases and approximately 275,000 net acres in the Gulf of Mexico. It also has interests in approximately 925,000 net acres in offshore Malaysia; and approximately 290,000 net acres in offshore China.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
