Zacks recommends Baytex Energy (BTE)

[dan_s]

Notes below are from Zacks Equity Research on August 7th

One stock to keep an eye on is Baytex Energy (BTE). BTE is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 7.87, which compares to its industry's average of 9.88. BTE's Forward P/E has been as high as 14.45 and as low as 4.73, with a median of 6.99, all within the past year.

We should also highlight that BTE has a P/B ratio of 0.87. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.92. BTE's P/B has been as high as 1.14 and as low as 0.74, with a median of 0.98, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BTE has a P/S ratio of 0.8. This compares to its industry's average P/S of 1.1.

Finally, investors should note that BTE has a P/CF ratio of 3.51. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. BTE's P/CF compares to its industry's average P/CF of 5.60. BTE's P/CF has been as high as 4.98 and as low as 1.96, with a median of 4.01, all within the past year.

These are just a handful of the figures considered in Baytex Energy's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that BTE is an impressive value stock right now.
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MY TAKE: Baytex drew my attention in early 2023 when they announced the acquisition of Ranger Oil. The transaction closed on June 20, 2023. Ranger Oil was one of my Top Picks in the Sweet 16 last year and I thought Baytex acquired a lot of high-quality "Running Room" at a very cheap price.
Prior to the Ranger acquisitions Baytex reported Q1 2023 production of 86,760 Boepd (84% oil and high-value NGLs). Since then, most of their growth has come from South Texas, primarily on Ranger's leasehold. In Q2 Baytex reported production of 154,194 Boepd (85% liquids).
Baytex is on pace to generate close to $2Cdn billion of operating cash flow ($2.45Cdn per share) and over $700Cdn million of free cash flow this year.
There is no justification that I can see for this stock to be trading below book value.

[dan_s]

I just noticed that in our Sweet 16 Growth Portfolio, Baytex has the highest percentage of crude oil in its production mix; 71.7% of Boepd.

The next highest percentage of oil are Matador Resources (MTDR) and Northern Oil & Gas (NOG); both with 59.1% of Boepd.