Are You Overlooking This Energy Company?

Parkland Fuels offers an attractive way for investors to double down on their energy portfolios.

| More on:
The Motley Fool

Most investors tend to gravitate to oil and gas companies that either extract, refine, or transport their goods such as Husky Energy or TransCanada, while overlooking the companies that deliver the oil, gas, and propane to the end users. Investing in companies such as this allows investors to double down on their energy portfolios, reaping the rewards from both the wholesale and retail markets.

One company, many subsidiaries

Our example today is Parkland Fuels (TSX: PKI) a company that has been growing through a healthy diet of refined margins and acquisitions. While many people may be unfamiliar with the name Parkland Fuels, many will know the company through its subsidiaries, including Bluewave Energy, Columbia Fuels, Neufield Petroleum & Propane, Island Petroleum, and SPF Energy, among others.

Through this plethora of subsidiaries, Parkland has become the nation’s fastest-growing consumer-direct fuel supplier. Due to the rate of acquisitions Parkland has engaged in, it now has an operational presence in most Canadian provinces. It also operates in North Dakota, South Dakota, Montana, and Wyoming under the newly acquired SPF Energy banner, a banner that also included a sizable rail terminal in its purchase.

At one time the company was primarily a heating fuel delivery service to mainly rural Canada, but it has since expanded to include gas station franchises Fast Gas Plus and Race Track Gas. Parkland also purchased 10 Chevron gas bars in northern BC during the previous quarter.

Aiming for growth

When it comes to Parkland’s balance sheet, the numbers do not disappoint — revenue in the previous quarter was $2 billion, up from $1.2 billion in Q1 2013. Net earnings came in at $22 million, or $0.30 per share, down from $30 million, or $0.44 per share. This drop should not alarm investors, though. Rather, investors should see this as part of the cost to acquire Elbow River Marketing, TransMontaigne Marketing, Sparling Propane, and SPF Energy. This is because Parkland is planning to meet its goal to double EBITDA between 2011 and 2016, with acquisitions being a key component of the plan.

Parkland sees itself as a potential exit strategy for independent fuel marketers looking to divest or retire from the industry. It has also positioned itself as a worthwhile partner for major refineries looking to sell or adjust their downstream marketing businesses.

Parkland Fuels’ stock is looking quite healthy, with a Friday closing price of $21.60 and a 52-week range of $15.90 to $21.99. The stock has an average price target of $21.90 with a top price of $23.00, with the ratings “buy” and “outperform”. The stock also offers an annual dividend of $1.06 with a yield of 4.9%. If you asked me whether you should take a further look into Parkland Fuels, my answer would be yes.

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 Cameron Conway does not own shares in any company mentioned here.

More on Investing

Solar panels and windmills
Energy Stocks

Algonquin Stock Has Broken Investors’ Hearts, but I Think It Will Turn a Corner

AQN stock faces more uncertainty in 2023, but could be a compelling value pickup for income investors.

Read more »


Better Buy: Manulife Stock vs. Suncor Stock

Manulife Financial Corp. (TSX:MFC) and Suncor Energy Inc. (TSX:SU) are powerhouses that offer nice value and income right now.

Read more »

energy industry
Energy Stocks

2 Top Energy Stocks to Buy Right Now

These energy companies remain immune to the economic and commodity down cycles.

Read more »

Man holding magnifying glass over a document

4 Canadian Small Caps to Keep Your Eye on

These small-cap stocks have a long runway for growth with potential to deliver stellar returns in the long term.

Read more »

edit Businessman using calculator next to laptop

Where to Invest $1,000 in 2023

Despite the economic headwinds, the following three Canadian stocks look attractive due to their solid underlying business and stable cash…

Read more »

man is enthralled with a movie in a theater

Could Cineplex Stock Be a Big Winner in 2023?

Cineplex trades roughly 75% off its pre-pandemic high and is well on its way to recovery this year, making it…

Read more »

grow money, wealth build
Dividend Stocks

2 Ultra-High-Yielding TSX Stocks to Buy With $1,000

You don’t need thousands to start investing. Here are two super high-yielding TSX stocks to buy now that can provide…

Read more »

Man with no money. Businessman holding empty wallet
Stocks for Beginners

Canadians Investors: How to Know When We’ve Hit a Recession

A recession is coming in 2023, but what does that even mean? And how can investors protect themselves before it…

Read more »