Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Which Stock Is the Ticket to Double Your Money?

Published 2019-07-12, 07:29 a/m
Updated 2019-07-12, 07:36 a/m
© Reuters.

© Reuters.

Natural gas stocks have been beaten to a pulp and are trading at multi-year low valuations.

ARX Price to Book Value data by YCharts

In the same period, their book value per share has remained stabled or improved.

ARX Book Value (Per Share) data by YCharts

Let’s review the gas-weighted oil and gas producers to see which one has the best chance of doubling your money.

ARC Resources The production mix of ARC Resources (TSX:ARX) is estimated to be about 74% this year. Its operating cash flow had a compound annual growth rate (CAGR) of 7.8% over the past three years. In the period, the oil and gas producer reinvested nearly all of the cash flow back into the business and paid out dividends that were 13.9 times the free cash flow.

In the trailing 12 months, ARC Resources generated $791.5 million of operating cash flow and $113.4 million of free cash flow and paid out $212.3 million of dividends. So, there’s a chance that it can cut its dividend, which sits at a yield of 9.2%.

Its cash-flow-to-debt ratio is about 0.85. So, technically, the company can pay off the debt in a little more than a year if it wanted to.

In the last quarter, ARC Resources’s debt-to-equity and debt-to-asset ratios were 0.67 and 0.40, respectively.

Analysts have a 12-month target of $12.80 per share on ARX stock, which represents the potential to nearly double your money from $6.48 per share as of writing.

Birchcliff Energy The production mix of Birchcliff Energy (TSX:BIR) is estimated to be about 78% in 2019. Its operating cash flow had a CAGR of 29.7% over the past three years.

In the period, the company’s capital spending was nearly double that of the operating cash flow it generated. In the period, Birchcliff increased its share count by about 75% to raise the extra capital needed.

In the trailing 12 months, Birchcliff generated $327.3 million of operating cash flow and $29.1 million of free cash flow and paid out $34.6 million of dividends. Currently, Birchcliff offers a yield of about 3.8%.

Its cash-flow-to-debt ratio is about 0.48. Therefore, the company can technically pay off the debt in about two years.

In the last quarter, Birchcliff’s debt-to-equity and debt-to-asset ratios were 0.62 and 0.38, respectively.

Analysts have a 12-month target of $5.63 per share on BIR stock, which represents a potential to more than double your money from $2.72 per share as of writing.

Peyto The production mix of Peyto Exploration & Development (TSX:PEY) is estimated to be about 87% this year. Its operating cash flow had a CAGR of -2.8% over the past three years.

In the period, the gas-weighted producer reinvested about 90% of the cash flow back into the business and paid out dividends that were 3.7 times the free cash flow.

In the trailing 12 months, Peyto generated nearly $434 million of operating cash flow and $167.8 million of free cash flow and paid out $105.6 million of dividends. So, its yield of 5.9% should be sustainable.

Its cash-flow-to-debt ratio is about 0.36. So, the company can technically pay off the debt in about three years should it choose to do so.

In the last quarter, Peyto’s debt-to-equity and debt-to-asset ratios were 1.2 and 0.55, respectively.

Analysts have a 12-month target of $7.62 per share on Peyto stock, which represents near-term upside potential of about 88% from $4.06 per share as of writing.

Foolish takeaway Of the three gas-weighted producers, Birchcliff appears to be the least leveraged, while Peyto is the most leveraged. While the stocks of both Arc Resources and Birchcliff have a good chance of substantial near-term upside, Birchcliff has better coverage for its dividend. So, Birchcliff could be the ticket to double your money.

Fool contributor Kay Ng owns shares of BIRCHCLIFF ENERGY LTD. and PEYTO EXPLORATION AND DVLPMNT CORP.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.