Price to earnings ratio is the most commonly used investment metric. The assessment of relative changes in PE ratio over the course of time highlights the low and high multiples investors are willing to pay for the current and future earnings of a company. Most investors would like to compare the current PE of the company with its historical averages. Comparing a company's current P/E ratio with benchmarks such as its historical P/E average can help a value investor determine if the stock is cheap, fully valued or overpriced. We identified the top 5 energy stocks trading below or near the average of its yearly low P/E for the last 5 years. These securities are pretty undervalued compared to other securities in this sector.
EOG Resources (EOG): EOG Resources, Inc. and its subsidiaries engage in the exploration, development, production and marketing of natural gas and crude oil primarily in the United States, Canada, the Republic of Trinidad and Tobago, the United Kingdom and the People's Republic of China. The Company has a Return on Assets (ROA) of 0.81% and a Return on Equity (ROE) of 1.59%. The company is trading with a Return on Invested Capital (ROIC) of 1.14%. The company is trading at 27.22 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 29.08 and the average price to earnings multiples in the same period is 44.08.The Stock is expected to grow at 54.11% over the next 5 years. The company is valued at $434.7 using the minimum earnings multiples and $658.9 using the average earnings multiples over the last 5 years. EOG is currently trading at $105.90, raising $7.39 or 7.5% this year.
Baker Hughes Inc (BHI): Baker Hughes Incorporated is engaged in the oilfield services industry. Baker Hughes is a supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. The company also provides industrial and other products and services to the downstream refining, and process and pipeline industries. The company has a ROA of 4.7% and a ROE of 7.59%. The company is trading with a ROIC of 6.00%. BHI is trading at 12.38 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 11.72 and the average price to earnings multiples in the same period is 20.31.The Stock is expected to grow at 26.11% over the next 5 years. The company is valued at $98.9 using the minimum earnings multiples and $171.4 using the average earnings multiples over the last 5 years. BHI is currently trading at $49.13, raising $0.94 or 1.93% this year.
Halliburton Co (HAL): Halliburton company provides various products and services to the energy industry for the exploration, development and production of oil and natural gas worldwide. It operates in two segments: Completion and Production, Drilling and Evaluation. The company has a ROA of 12% and a ROE of 21.56%. HAL is trading with a ROIC of 15.56%. The Stock is trading at 11.94 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 9.23 and the average price to earnings multiples in the same period is 15.59.The company is expected to grow at 22.89% over the next 5 years. HAL is valued at $54.8 using the minimum earnings multiples and $92.6 using the average earnings multiples over the last 5 years. HAL is currently trading at $36.78, raising $2.13 or 6.17% this year.
Peabody Energy Corp (BTU): Peabody Energy Corporation and its subsidiaries engage in the exploration, mining and production of coal. Peabody mines and sells thermal coal to electric utilities and metallurgical coal to industrial customers. BTU has a ROA of 7.3% and a ROE of 18.41%. BTU is trading with a ROIC of 11.13%. The company is trading at 9.68 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 8.95 and the average price to earnings multiples in the same period is 16.76. BTU is expected to grow at 15.60% over the next 5 years. BTU is valued at $43.1 using the minimum earnings multiples and $80.7 using the average earnings multiples over the last 5 years. BTU is currently trading at $35.31, raising $2.2 or 6.64% this year.
CONSOL Energy Inc (CNX): CONSOL Energy Inc. engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. The company involves in the mining, preparation and marketing of steam coal primarily to electric power generation industry and metallurgical coal to steel and coke producers. The company has a ROA of 3.5% and a ROE of 14.66%. The company is trading with a ROIC of 7.41%. The company is trading at 12.95 times current earnings multiple. The average of the minimum forward price to earnings multiples over the last 5 years for the company is 10.78 and the average price to earnings multiples in the same period is 18.88. CNX is expected to grow at 19.32% over the next 5 years. The stock is valued at $39.6 using the minimum earnings multiples and $69.3 using the average earnings multiples over the last 5 years. CNX is currently trading at $35.74, falling $0.85 or 2.32% this year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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