While growth stocks have largely led value stocks over much of the past 15 years, a rotation into value could already be underway. Value outperformed growth by more than 20 percentage points in 2022, as measured by the Russell 1000 Growth and Value indexes, leading to the belief that a rotation to value had begun. While value has trailed growth in 2023, some investors see it as a temporary setback in an early inning for value leadership.
Today’s trade alert features an enticing opportunity for investors seeking value – especially when you consider the potential tailwinds currently formulating for this well-established name…
Canadian Natural Resources LTD (CNQ)
When it comes to energy, Canada stands out with its expansion of fossil-fuel production. Oil giant Canadian Natural Resources has the largest undeveloped base in the Western Canadian Sedimentary Basin, is the largest independent producer of natural gas in Western Canada, and the largest producer of heavy crude oil in Canada.
Higher oil and gas prices substantially improved energy companies’ earnings in 2022. CNQ utilized the excess cash to return to shareholders and improve its balance sheet. The company lowered its debt from around $35 billion in 2021 to $12 billion at the end of Q1 2023.
Valued at some $58.4 billion, the Canadian energy behemoth has a trailing four-quarter earnings surprise of roughly 7.4%, on average. Considering the potential tailwinds for the industry and for CNQ itself, it would make sense for the massive oil company’s stock to trade at a premium price. Potential investors will be glad to know that the stock has a forward P/E ratio of 7.4, better than the industry average of 8.
The pros on Wall Street agree that CNQ shares are ripe for the picking. Of 21 analysts offering recommendations, 14 rate the stock a Buy and 7 give it a Hold rating. There are no Sell recommendations. CNQ also boasts an attractive 4.9% dividend yield. A median price target of $67.37 represents a 25% increase from the current price.
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