Suncor Stock: A Millionaire Maker?

With a renewed focus on extracting value from its integrated business, we can expect tremendous value creation from Suncor stock.

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What is a millionaire-maker stock? Is it a high-risk stock that explodes higher in little time, leaving you laughing your way to the bank? Or is it a tried-and-true stock that creates value consistently and reliably over the long term? Well, I guess it can be either. But in this article, I will focus on investing in the long-term value generator that gets you to millionaire status over the long term. Let’s talk about Suncor Energy (TSX:SU) and the potential of Suncor stock to make you a millionaire.

Suncor stock: An exciting history of making millionaires

Over the last 30 years, Suncor stock has made waves in the oil and gas business. Similarly, Suncor’s stock price has appreciated more than 2,100% to its current price of over $45. And it has paid a fortune in dividends. As you can see from the graph of Suncor’s stock price below, investing in it has undoubtedly created some millionaires.

Suncor stock

Suncor has emerged today as a solid, reliable, integrated oil and gas company that is entering a new phase of value creation. After sub-optimal performance, a new chief executive officer (CEO) is changing things, dedicated to creating shareholder value and increasing Suncor’s standing.

Oil and gas: Making the most of rising demand

Suncor Energy has been Canada’s leading integrated oil and gas company for quite some time. But after years of falling behind in safety standards and operating performance, Suncor stock became a disappointment — until recently, that is.

There are plans in place that are aimed at correcting past mistakes and setting Suncor up for a strong future. As far as we can tell, oil and gas are here to stay. The path forward lies in investing in technologies to clean up this industry, and Suncor and other industry players are doing just that.

Last year, Suncor achieved its best safety year ever. Also, production soared to 808,000 barrels a day, the highest ever. And Suncor is intent on making the most of its bitumen upgraders, with its best-ever utilization of 93%.

Suncor stock: Undervalued

Suncor has a long history of strong shareholder returns. It’s a business that has provided consistent, growing cash flows and dividends. Today, Suncor stock is trading at a mere seven times earnings and four times cash flow. This is below its peer group, despite Suncor’s 21% return on equity, which is higher than its peer group.

Suncor’s fourth-quarter 2023 earnings came in above expectations. It came in at $1.26 versus consensus expectations that were calling for earnings per share of $1.07. In fact, Suncor has been beating expectations for quite some time now. This is a reflection of both the new CEO’s real plan to drive value as well as the fact that expectations have turned too negative on the company.

Looking ahead

In my view, Suncor has all the makings of a company that’s set to generate tremendous value and make a lot of millionaires in the process. Over time, things like improving the mining operations through more efficient, autonomous trucks, reducing staff, and gaining control of their bitumen supply will generate value.

This value creation will result in lower costs and lower the company’s breakeven oil price. Higher free cash flow, and higher dividends will likely come to characterize Suncor as it capitalizes fully on its position as Canada’s leading integrated oil and gas company.

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 Karen Thomas has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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