Diamondback Energy: A Cheap Oil And Gas Stock With More Fuel Left In The Tank

May 14, 2022

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Diamondback Power (NASDAQ:) is without doubt one of the largest crude oil and pure fuel producers of the Permian Basin—the area that spans between western Texas and southeast New Mexico and accounts for about 30% of whole home oil output. Its strategic positioning and consolidated market share make it a significant participant within the U.S. power sector.

Powered by a positive macro surroundings for its core enterprise, which incorporates exploring, growing, and producing oil, fuel, and pure fuel liquids, the corporate gained round 59% over the past 12 months, reaching a market cap of $22.4 billion. FANG closed Thursday at $127.04.

FANG Daily

With a near-perfect InvestingPro monetary well being rating of 4/5 and a particularly enticing valuation, Diamondback Power suits the invoice as a strong title to personal amid the present surroundings.

FANG Financial Health Score

Supply: InvestingPro

Robust Fundamentals

Diamondback Power’s inventory has a relatively low price-to-earnings (P/E) ratio of 8.2, making it cheaper than different notable names within the thriving power sector, reminiscent of EOG Assets (NYSE:), Pioneer Pure Assets (NYSE:), Devon Power (NYSE:), and Continental Assets (NYSE:).

Professional additionally highlights a number of extra tailwinds the power firm at the moment has, together with strong earnings and money movement progress, permitting administration to proceed to return capital to shareholders within the type of increased dividend payouts and inventory buybacks.

Certainly, the oil-and-gas firm affords a comparatively excessive annualized dividend of $2.80 per share at a yield of two.24%, greater than the implied yield for the S&P 500, at the moment at 1.55%.

FANG Company Profile

Supply: InvestingPro

Analyst Consensus

Shares of the Midland, Texas-based Diamondback have thrived in 2022, gaining about 16% year-to-date, vastly outpacing the comparable returns of each the and the . The corporate hit all-time excessive of $147.99 on Mar. 25.

Not surprisingly, Diamondback’s inventory might see a further upside of roughly 62% within the subsequent 12 months, in accordance with the Investing Professional mannequin, bringing it nearer to its honest worth of $205.76 per share.

FANG Fair Value

Supply: InvestingPro

Analysts are additionally optimistic in regards to the firm’s long-term views, citing robust power market fundamentals. The common analyst worth goal is $178.79, representing an upside of 40.7% from present ranges.

FANG Consensus Estimates

Supply: Investing.com

Backside Line

Diamondback ought to proceed to profit from enhancing power market fundamentals, particularly as and costs hover close to multi-year highs.

The present market makes it tougher than ever to make the best selections. Take into consideration the challenges:

  • Inflation
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  • Disruptive applied sciences
  • Rate of interest hikes

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