Advertisement
Canada markets closed

  • S&P/TSX

    21,873.72
    -138.00 (-0.63%)
     

  • S&P 500

    5,071.63
    +1.08 (+0.02%)
     

  • DOW

    38,460.92
    -42.77 (-0.11%)
     

  • CAD/USD

    0.7297
    -0.0023 (-0.32%)
     

  • CRUDE OIL

    82.89
    +0.08 (+0.10%)
     

  • Bitcoin CAD

    87,869.38
    -3,149.80 (-3.46%)
     

  • CMC Crypto 200

    1,389.99
    -34.11 (-2.39%)
     

  • GOLD FUTURES

    2,329.40
    -9.00 (-0.38%)
     

  • RUSSELL 2000

    1,995.43
    -7.22 (-0.36%)
     

  • 10-Yr Bond

    4.6520
    +0.0540 (+1.17%)
     

  • NASDAQ futures

    17,470.75
    -193.75 (-1.10%)
     

  • VOLATILITY

    15.97
    +0.28 (+1.78%)
     

  • FTSE

    8,040.38
    -4.43 (-0.06%)
     

  • NIKKEI 225

    38,460.08
    +907.92 (+2.42%)
     

  • CAD/EUR

    0.6819
    -0.0017 (-0.25%)
     

Devon Energy Corporation (DVN) Hit a 52 Week High, Can the Run Continue?

Zacks Equity Research
·4 min read

Have you been paying attention to shares of Devon Energy (DVN)? Shares have been on the move with the stock up 16.1% over the past month. The stock hit a new 52-week high of $67.91 in the previous session. Devon Energy has gained 53.8% since the start of the year compared to the 31.8% move for the Zacks Oils-Energy sector and the 47.3% return for the Zacks Oil and Gas - Exploration and Production - United States industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 2, 2022, Devon Energy reported EPS of $1.88 versus consensus estimate of $1.74 while it missed the consensus revenue estimate by 5.12%.

For the current fiscal year, Devon Energy is expected to post earnings of $8.54 per share on $17.5 billion in revenues. This represents a 141.93% change in EPS on a 46.84% change in revenues. For the next fiscal year, the company is expected to earn $9.03 per share on $17.27 billion in revenues. This represents a year-over-year change of 5.75% and -1.3%, respectively.

ADVERTISEMENT

Valuation Metrics

Devon Energy may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Devon Energy has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 7.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 5.8X. On a trailing cash flow basis, the stock currently trades at 10.2X versus its peer group's average of 6.2X. Additionally, the stock has a PEG ratio of 0.16. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Devon Energy currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Devon Energy meets the list of requirements. Thus, it seems as though Devon Energy shares could still be poised for more gains ahead.

How Does DVN Stack Up to the Competition?

Shares of DVN have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Range Resources Corporation (RRC). RRC has a Zacks Rank of # 1 (Strong Buy) and a Value Score of C, a Growth Score of A, and a Momentum Score of D.

Earnings were strong last quarter. Range Resources Corporation beat our consensus estimate by 2.61%, and for the current fiscal year, RRC is expected to post earnings of $4.80 per share on revenue of $3.89 billion.

Shares of Range Resources Corporation have gained 1.7% over the past month, and currently trade at a forward P/E of 6.68X and a P/CF of 9.5X.

The Oil and Gas - Exploration and Production - United States industry is in the top 3% of all the industries we have in our universe, so it looks like there are some nice tailwinds for DVN and RRC, even beyond their own solid fundamental situation.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Devon Energy Corporation (DVN) : Free Stock Analysis Report
 
Range Resources Corporation (RRC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.