Whether you see them or not, energy businesses play a crucial part in our daily activities, from powering our homes and businesses to powering our transportation and industries.Still, their generally high capital requirements expose them to the ups and downs of commodity prices and economic cycles, and the industry’s six-month return of 2.4% has fallen short of the S&P 500’s 13.5% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one energy stock boasting a durable advantage and two we would avoid.
Two Energy Stocks to Sell:
Golar LNG (GLNG)
Market Cap: $4.93 billion
Pioneering a way to monetize stranded gas reserves that would otherwise be uneconomical to develop, Golar LNG (NASDAQ: GLNG) converts ships into floating liquefied natural gas facilities that liquefy natural gas at offshore sites.
Why Is GLNG Not Exciting?
- Muted 2.8% annual revenue growth over the last five years shows its demand lagged behind its energy upstream and integrated energy peers
- Negative free cash flow raises questions about the return timeline for its investments
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $48.28 per share, Golar LNG trades at 145.1x forward P/E. Dive into our free research report to see why there are better opportunities than GLNG.
BKV (BKV)
Market Cap: $2.63 billion
Operating a "closed-loop" model linking gas production to carbon capture, BKV (NYSE: BKV) produces natural gas from shale formations in Texas and Pennsylvania, selling it to utilities, industrial users, and exporters.
Why Are We Bearish on BKV?
- Smaller revenue base of $1.51 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Costs have risen faster than its revenue over the last five years, causing its EBITDA margin to decline by 18.8 percentage points
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
BKV is trading at $24.10 per share, or 12.8x forward P/E. To fully understand why you should be careful with BKV, check out our full research report (it’s free).
One Energy Stock to Buy:
Chord Energy (CHRD)
Market Cap: $7.91 billion
Holding the largest acreage position in the Williston Basin, Chord Energy (NASDAQ: CHRD) drills for and produces crude oil, natural gas liquids, and natural gas in North Dakota's Williston Basin.
Why Is CHRD a Good Business?
- Annual revenue growth of 24.8% over the last ten years was superb and indicates its market share increased during this cycle
- Scale advantages are evident in its $6.32 billion revenue base, which provides operating leverage when demand is strong
- Strong free cash flow margin of 23.3% enables it to reinvest or return capital consistently
Chord Energy’s stock price of $144.59 implies a valuation ratio of 7.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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