Top Picks: 3 Growth Stocks Under $6 Could Deliver up to 70% ROI

A pair of energy names and a TSX30 winner from the mining sector are the growth stocks that could deliver an ROI of up to 70% within a year or less.

| More on:
grow dividends

Image source: Getty Images

Two constituents from the energy sector and one copper mining producer are the top picks for growth investors in 2022. The three stocks are price-friendly but the return on investment (ROI) could be as high as 70%.

If you’re looking for high growth, scoop shares of Baytex Energy (TSX:BTE)(NYSE:BTE), Tamarack Valley Energy Ltd. (TSX:TVE), and Capstone Mining (TSX:CS) now before their prices soar through the roof. As of February 18, 2022, the one-year trailing price return ranges from 77% to 374%.

The energy sector continues to ride high with its 20.51% year-to-date gain. Baytex ($4.84) and Tamarack Valley ($4.71) have nearly identical share prices but continue to surge. Investors in the former enjoy a 23.79% gain, while latter is up 22.56 and pays a 2.03% dividend. Capstone trades at $5.95 per share and is ranked number five in the 2021 TSX30 growth stocks list.

Top price performers

Baytex Energy will present its Q4 and full-year 2021 results this week. Analysts covering the stock expect strong financial and operating performance. In the nine months ended September 2021, petroleum and natural gas sales increased 77.4% versus the same period in 2020.   

The highlight in the first three quarters was the $1.05 billion net income compared to the $2.66 billion net loss after Q3 2020. Notably, the $2.73 billion oil & gas corporation generated $284 million in free cash flow during the period, while reducing net debt by $285 million.

According to management, if commodity prices are sustained at the current levels, Baytex could deliver over $400 million in free cash flow this year. Moreover, if prices remain constant at US$65 and US$75 per barrel, the company can generate cumulative free cash flow of $2.0 billion and $2.6 billion, respectively.  

Tamarack had an incredible 185% turnaround in the nine months ended September 30, 2021. From a net loss of $293.16 million in the same period in 2020, net income climbed to $250 million. Cash flow from operating activities increased 77% to $179.24 million.

The $2.03 billion oil & gas exploration and production company has yet to report the full-year results, although preliminary data points to strong business performance. Its president and CEO, Brian Schmidt, said, “2021 was a transformational year for Tamarack as we advanced our strategy of driving long term sustainable free funds flow growth forward.”

Transformational growth

Copper could be a safety net besides gold and silver if high inflation persists. Capstone Mining has two producing copper mines (U.S. and Mexico). The $2.46 base-metals producer is well-positioned for transformational growth because of its multi-asset operations.

Expect the TSX30 winner to soar following its impressive 2021 financial results. Net income and operating cash flow of US$252.9 million and US$556.3 million last year were both new records for Capstone.

Capstone CEO Darren Pylot said, “Our investments in optimization and expansion over the past two years have allowed us to take advantage of robust copper prices.” He adds the large net cash balance sheet came before a period of transformational growth.

Price forecasts

Based on analysts’ high price target, Baytex could rise 49.8% to $7.25 in one year. Tamarack Valley and Capstone Mining carry strong buy ratings from analysts. The upside potential is 69.9% and 67.7%, according to the price forecasts.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Energy Stocks

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

potted green plant grows up in arrow shape
Energy Stocks

1 Ridiculously Undervalued Growth Stock Down 40% to Buy Hand Over Fist

Don’t miss your chance to load up on this high-yielding, renewable energy growth stock.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

1 Renewable Energy Stock to Buy and Hold

Here's why Brookfield Renewable (TSX:BEP.UN) is a top renewable energy stock long-term investors should consider.

Read more »

financial freedom sign
Energy Stocks

Could Investing $10,000 in Enbridge Make You a Millionaire?

A top-tier dividend stock can help you accumulate wealth or become a millionaire over time.

Read more »

Aerial view of a wind farm
Energy Stocks

Brookfield Renewable Stock Climbs Higher: Time to Buy?

Brookfield Renewable stock (TSX:BEP.UN) continues to climb, but remains below the $40 mark. But that share price looks in view.

Read more »

Nuclear power station cooling tower
Energy Stocks

Up 35%, Is Cameco Stock a Buy in June 2024?

When a stock is bullish, and you have missed the starting point of the trend, it can be challenging to…

Read more »

Oil pumps against sunset
Energy Stocks

4 Top Energy Stocks (With Dividends) to Buy and Hold Forever

These four energy stocks are the best way to get in on long-term income from both growth and dividends.

Read more »

Man considering whether to sell or buy
Energy Stocks

Cameco Stock: Buy, Sell, or Hold?

Cameco stock (TSX:CCO) has risen by above 80% in the last year alone, and 14% in the last month. Will…

Read more »