As market indexes continue to gain, U.S. crude oil prices topped $80 per barrel for the first time since November 2014 on Friday.
Alongside a broader rally in commodities including natural gas and coal, oil prices have surged in recent days amid an energy crunch in Europe and Asia.
West Texas Intermediate Crude jumped more than 2% to trade as high as $80.09 per barrel throughout the course of the morning, while Brent crude, the international benchmark, advanced 1.7% to $83.32 per barrel.
Due to these developments, investors may be interested in finding undervalued opportunities in the oil and gas industry.
As of Oct. 8, the GuruFocus All-in-One Screener, a Premium feature, found energy companies that are modestly undervalued, have a price-to-GF value between 0.4 and 0.9, a predictability rank of at least one out of five stars and are owned by at least two gurus include Helix Energy Solutions Group Inc. (HLX, Financial), Dril-Quip Inc. (DRQ, Financial), Navigator Holdings Ltd. (NVGS, Financial), Amplify Energy Corp. (AMPY, Financial) and REX American Resources Corp. (REX, Financial).
Helix Energy Solutions
Helix Energy Solutions (HLX, Financial) has a $670.08 million market cap; its shares were trading around $4.43 on Friday with a price-earnings ratio of 55.57, a price-book ratio of 0.39 and a price-sales ratio of 0.98.
Determined by historical ratios, past performance and future earnings projections, the GF Value of $5.94 and a price-to-GF Value ratio of 0.75 suggest the Houston-based oilfield services company is modestly undervalued.
Helix Energy’s financial strength and profitability were both rated 5 out of 10 by GuruFocus. In addition to poor interest coverage, the Altman Z-Score of 1.24 warns the company is at risk of bankruptcy if it does not improve its liquidity. The return on invested capital is also being overshadowed by the weighted average cost of capital, indicating there may be issues with creating value as the company grows.
The company’s margins and returns on equity, assets and capital underperform at least half of its competitors. Helix also has a moderate Piotroski F-Score of 5 out of 9, which means operations are typical for a stable company. Despite recording a decline in revenue per share over the past five years, it still has a one-star predictability rank. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Helix Energy, Hotchkis & Wiley has the largest stake with 0.82% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Caxton Associates (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) also own the stock.
Dril-Quip
Dril-Quip (DRQ, Financial) has a market cap of $944.77 million; its shares were trading around $26.67on Friday with a price-book ratio of 0.96 and a price-sales ratio of 2.74.
With a GF Value of $34.76 and a price-to-GF Value ratio of 0.77, the offshore oilfield services company, which is headquartered in Houston, appears to be modestly undervalued.
GuruFocus rated Dril-Quip’s financial strength 8 out of 10, driven by a robust Altman Z-Score of 6.3 that indicates it is in good standing as well as strong debt-related margins.
The company’s profitability scored a 6 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. Dril-Quip has a low Piotroski F-Score of 3, however, indicating operations are in poor shape. Despite recording a decline in revenue per share in recent years, it still has a one-star predictability rank.
With 1.88% of its outstanding shares, Ken Fisher (Trades, Portfolio) is Dril-Quip’s largest guru shareholder. Mario Gabelli (Trades, Portfolio), Hotchkis & Wiley, Charles Brandes (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also have positions.
Navigator Holdings
Navigator (NVGS, Financial) has a $690.78 million market cap; its shares were trading around $8.92 on Friday with a price-earnings ratio of 63.99, a price-book ratio of 0.53 and a price-sales ratio of 1.48.
Trading with a GF Value of $10.90 and a price-to-GF Value ratio of 0.82, the British company, which operates a fleet of ships to transport liquefied petroleum gas, petrochemical gases and ammonia, appears to be modestly undervalued.
Navigator’s financial strength was rated 4 out of 10 by GuruFocus. As a result of issuing approximately $5.57 million in new long-term debt over the past three years, it has poor interest coverage. Additionally, the Altman Z-Score of 0.99 warns it is at risk of going bankrupt. The WACC also eclipses the ROIC, implying it struggles to create value.
The company’s profitability fared better, scoring a 6 out of 10 rating. Even though the operating margin is in decline, Navigator’s returns top around half of its competitors. It also has a high Piotroski F-Score of 7, suggesting business conditions are healthy, but the one-star predictability rank is on watch.
Royce is the company’s largest guru shareholder with a 2.33% stake. Other top guru investors are Murray Stahl (Trades, Portfolio), Simons’ firm, Gabelli, Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio).
Amplify Energy
Amplify Energy (AMPY, Financial) has a market cap of $120.42 million; its shares were trading around $3.29 on Friday with a price-sales ratio of 0.44.
Based on a GF Value of $4.79 and a price-to-GF Value ratio of 0.70, the oil and gas producer headquartered in Houston appears to be modestly undervalued.
GuruFocus rated Amplify’s financial strength 2 out of 10 on the back of poor interest coverage, a Sloan ratio that is indicative of poor earnings quality and a weak Altman Z-Score of -2.01 that warns of potential bankruptcy risk.
The company’s profitability did not fare much better with a 4 out of 10 rating. While returns are negative and underperforming a majority of industry peers, it has a robust operating margin. Amplify also has a moderate Piotroski F-Score of 5 and a one-star predictability rank.
Of the gurus invested in Amplify, Howard Marks (Trades, Portfolio)’ Oaktree has the largest position with 1.08% of its outstanding shares. Yacktman Asset Management (Trades, Portfolio), Simons’ firm and Pioneer Investments also own the stock.
REX American Resources
REX American Resources (REX, Financial) has a $501.56 million market cap; its shares were trading around $84 on Friday with a price-earnings ratio of 18.1, a price-book ratio of 1.25 and a price-sales ratio of 0.86.
With a GF Value of $110.27 and a price-to-GF Value ratio of 0.77, the Dayton, Ohio-based company, which produces ethanol and other alternative energy options, appears to be modestly undervalued.
REX American Resources’ financial strength and profitability were both rated 7 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company has a robust Altman Z-Score of 9.14. Its ROIC also surpasses the WACC, meaning value is being created.
The company is also being supported by strong margins and returns that outperform over half of its competitors as well as a high Piotroski F-Score of 8. Despite recording a decline in revenue per share in the past several years, REX American still has a one-star predictability rank.
Simons’ firm has the largest stake in REX American Resources with 6.38% of its outstanding shares. Hotchkis & Wiley also has a position.
