Wall Street chatter says crude oil prices may be finally finding a bottom. That’s good news for energy stocks, which have been getting slammed amid oil’s lengthy downtrend. As prospects brighten for the energy patch, what stocks should you consider for your watch list - or even your portfolio?
We’ve narrowed it down to four VIP Pro Picks, which get the nod from not only InvestingPro’s sophisticated stock-picking tools, but Street analysts as well. And among these is oil-and-gas name Diamondback Energy (NASDAQ:FANG).
Importantly, like all Pro Picks, this week’s selections have all been stamped with an InvestingPro financial health score of 2.75 or more out of 5, which for the last 7 years has indicated outperformance vs. the S&P 500. That score indicates firm financials: top-notch earnings, cash flow, and growth vs. peers.
With an impressive overall health score of 3.08, Diamondback Energy outperforms the vast majority of peers on profit margins and its two- and five-year return on invested capital, as InvestingPro screeners reveal. And Diamondback vastly outstrips just about every other company in the sector when it comes to its revenue trend score - as well as its mighty cumulative earnings growth per share over the past three years.
You also get robust cash flow metrics with this company - a sky-high ratio of cash flow to current liabilities, and cash flow that comes in comfortably over its total debt. All that helps fund its dividend, which yields at an incredible 7.4%. Crucially, Diamondback’s forward price-to-earnings ratio is at a bargain basement 7.4x, and analysts consider it undervalued: Wall Street targets put upside at over 25% above the current stock price.
Put it all together, and Diamondback Energy looks particularly well positioned to run.
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Data as of June 8, 2023.
