Energy stocks are part of what makes the TSX index such an interesting area of investment for seasoned traders and beginners alike, especially if they’re new to investing in Canada. This week, the market rallied behind a spear-head of energy superstars, with some of the biggest names on Bay Street going positively stratospheric.
The following two stocks gained more than 10% over five days – and with low P/B ratios, it looks as though they may be attractively valued as well. Are either of them a buy today? Let’s comb through the data to find out.
Canadian energy stocks are among the most defensive on the TSX index, with a broad spread of capitalization sizes. Baytex Energy weighs in at a beefy $2 billion, and with a one-year past earnings growth of 94.8% beating its average five-year past earnings contraction by 13.4%, it’s got a good track record to boot.
This kind of growth is good to see if you are thinking of holding for the long term and want to invest in a stock with a decent pedigree in terms of positive earnings.
Though a comparative debt level of 63.5% of net worth is rather high, a P/B of 0.5 times book means that a speculative position isn’t too great a risk in terms of outlay. Baytex Energy gained 14.53% in the last five days at the time of writing, which shows that positive conditions can create upside in this interesting energy stock.
Those looking for established dividends and better value may want to go for this somewhat larger stock with its market cap of $44 billion). There’s a good recent lineage here, too: a one-year past earnings growth of 46.6% trounces its own five-year average past earnings contraction by 5.6%, and its comparative debt is slightly lower than Baytex Energy’s at 59.1% of net worth.
A P/E of 11.6 times earnings, P/B of 1.3 times book, and decently sized dividend yield of 3.74% make this the better buy in terms of transparency in value, and certainly in terms of passive income.
Meanwhile, it gained 14.71% in the last five days, demonstrating that it rolls with the market; its beta of 2.33 indicates fairly high volatility, though certainly not the highest on the TSX index.
Canadian Natural Resources‘ share price is discounted by 35% compared to its future cash flow value, which shows again that this stock is more attractively valued than Baytex Energy at the moment, which is currently more expensive than its future cash flow value. The former stock certainly has the edge in terms of market variables, size, and dividends, though the latter has had the higher percentage of earnings growth in the past 12-month period.
The bottom line
No two energy stocks were made equal, and poring over the figures for the two TSX index hero stocks above brought up plenty of reminders of this. While two of the best ways to make money with stocks seem to be represented with just two tickers here (capital gains and passive income), the fact is that Canadian Natural Resources seems like a better passive income stock than Baytex Energy, which is a capital gains stock.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.