3 Insanely Cheap Energy Stocks in 2019

After years of falling prices, energy stocks like Inter Pipeline (TSX:IPL) have become extremely cheap.

| More on:
Chalk outline of two arrows pointing in opposite directions

Image source: Getty Images.

Do you want to get high returns by investing in stocks that are positioned for growth?

In 2019, energy stocks might help you do just that. After falling in 2018, oil prices are making a comeback, and energy stocks are set to follow right behind. Although energy has been a weak sector since 2014, falling 44%, beaten down stocks like these often make the best buys.

In this article I’m going to show you three energy stocks that are trading at low P/E ratios. Each of these stocks is trading near 52 week lows despite steady growth. Two of the stocks on this list are growing earnings in the high double digits, and one of them trades at just 10 times forward earnings.

We can start by looking at a stock that grew revenue at 50% in its most recent quarter.

Keyera Corp (TSX:KEY)

Keyera Corp is an oil & gas transportation company based in Calgary. As a transportation firm, it makes money mainly by charging fees instead of a cut of oil & gas sales, so the company is not too exposed to oil price swings. In its most recent quarter, Keyera grew revenue by 50% despite the price of Canadian Crude tanking that quarter. If you like dividend income, Keyera will do you right, with a 6.39% forward annual dividend yield.

Seven Generations Energy Ltd (TSX:VII)

Seven Generations is a low-cost energy producer that focuses on environmentally friendly natural gas extraction. The company has two main projects: Montney, a low cost natural gas project spanning Alberta and BC; and Kakwa, a 500,000 acre LNG project in Northern Alberta. These projects are considered to be low-cost, high-margin extraction operations. Those high margins power strong growth, with Seven Generations growing revenue by 60% and net income by 129% in its most recent quarter. But if you think that growth has to come at a great cost, think again: Seven Generations trades at just 10 times forward earnings.

Inter Pipeline Ltd (TSX:IPL)

Inter Pipeline is probably the best-known stock on this list. It’s an international oil & gas infrastructure company that processes, transports and stores energy. In Q4 2018, the company set AFFO and net income records, earning $593 million. With net income up 12% year over year, Inter Pipeline is a growing, thriving operation. But despite setting earnings records, the company trades at just 15 times forward earnings and two times book value, making it a relatively cheap stock–with a high dividend yield to boot.

Bottom line

The Canadian energy sector has not been a top performer over the past five years. During a period that saw the TSX return about 7-8%, energy stocks as a class have fallen almost 50%. But now, with oil set to recover, the energy sector could be set for a comeback. Right now, the oil sands have an abundance of stocks trading at or just slightly above 10 times earnings despite high growth. This could therefore be a great time to buy depressed energy assets on the cheap.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Energy Stocks

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

energy industry
Energy Stocks

2 TSX Energy Stocks to Buy Hand Over Fist Now

These two rallying TSX energy stocks can continue delivering robust returns to investors in the long term.

Read more »

green energy
Energy Stocks

1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

Read more »

oil tank at night
Energy Stocks

3 Energy Stocks Already Worth Your While

Here's why blue-chip TSX energy stocks such as Enbridge should be part of your equity portfolio in 2024.

Read more »

Solar panels and windmills
Energy Stocks

1 Beaten-Down Stock That Could Be the Best Bet in the TSX

This renewable energy stock could be one of the best buys you make this year, as the company starts to…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Here's why Enbridge (TSX:ENB) remains a top dividend stock long-term investors may want to consider, despite current risks.

Read more »

Gas pipelines
Energy Stocks

If You Had Invested $5,000 in Enbridge Stock in 2018, This Is How Much You Would Have Today

Enbridge's high dividend yield hasn't made up for its dismal total returns.

Read more »

Bad apple with good apples
Energy Stocks

Avoid at All Costs: This Stock Is Portfolio Poison

A mid-cap stock commits to return more to shareholders, but some investors remember the suspension of dividends a few years…

Read more »