There are many ways to play the energy sector. From a series of dividend shares that produce bond-like income to other companies that are certainly much closer to growth stocks, investors have a series of options to choose from.
For Canadian investors who look at the TSX, this fact might be more true. The Canadian stock market is packed with energy shares with different risk levels (and upwards). In this article I will dive into it Baytex Energy (TSX: BTE) and the recent decrease of 40% in the past year.
This is why I think the recent dip is worth buying in an energy supply that some investors may be too risky to buy now.
What gives?
To begin with, Baytex is one of those smaller energy producers who translate his balance problems into price evaluation problems for investors.
After Baytex had repaid his debt tax at the end of 2022 to less than $ 1 billion, that number has risen around $ 2.2 billion to around $ 2.2 billion since the end of last year. That is not great, for a company that is currently appreciated at around $ 2.2 billion.
In other words, investors praise the share component of this company equally compared to his debt tax. Investors who are looking upside down in Baytex must believe that the operational model of the company will be able to support further refund on the road, whereby most investors largely ignore Baytex’s 3.1% dividend yield.
Is Baytex really worth buying?
In my opinion, the recent winning results of Baytex paint a picture that suggests that more financial flexibility can be on the horizon. The company has hit the profit estimates in the past quarter and placed almost $ 0.15 in EPS (compared to estimates of just $ 0.02). And despite an income shortage this last quarter, this operational efficiency improvement has been noticed by some investors.
With the net income that the $ 150 million is being breached and the adjusted funds of activities of more than $ 365 million, this share is a share that I think it could be a disproportionate beneficiary of higher oil prices. With so many debts on his balance on a relative level, even a small increase in energy prices could take this stock much higher.
In my opinion, Baytex is essentially a lever game on raw material prices. That is good for investors who think that inflation is for us.
So what now?
If you believe that the prices for a higher vehicle will be a characteristic of our society for a decade or longer, Baytex will look a compelling option here. The company has continued to increase its production (an increase of 2% on an annual basis that was most recently reported). And with all valuation relationships far below the sector average (and even the historical average of Baytex), one could also make a value argument here.
That does not mean that Baytex is not without risk. This is a risky game; I’m not going to coat it sugar. That said, I think Baytex currently has one of the best risk/reward on the market, at least for Canadian energy stocks.
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