Yahoo Finance If I Were You, I’d Buy These 2 Stocks Before They Skyrocket
Written by Christopher Liew, CFA at The Motley Fool Canada
The TSX’s energy sector has picked steam in the last 30 days following a soft start this year. As of this writing, the sector is the market leader with a +10.36% year-to-date gain versus the broader market’s +4.16%. Notably, many of its constituents are volume leaders, if not experiencing unusual volumes.
Two energy stocks from different industries appear ready to skyrocket. If I were to take a position before the bull run, my top picks are Parkland (TSX:PKI) and Total Energy Services (TSX:TOT).
Oil & gas refining & marketing
Parkland is a growth company supported by an integrated business that includes retail, commercial, and refining. The $7.79 billion international fuel distributor and retailer boasts over 4,000 global retail and commercial locations, serving over one million customers daily in Canada, the U.S., and the Caribbean.
At $44.32 per share (+3.77% year to date), the trailing one-year price return is 57.66%. Current investors partake in the 3.47% dividend. Also, Parkland is a Dividend Aristocrat. The 3% dividend hike recently marks 12 consecutive years of dividend increases. Market analysts’ average 12-month price target is $54.50 (+23%).
Management expects the resilient business model and growth platform to deliver long-term shareholder value. In 2023, sales and operating revenue declined 8.5% year over year to $32.45 billion, while net earnings jumped 52% to $471 million versus 2022.
Parkland’s president and chief executive officer (CEO), Bob Espey, said it was an excellent year and noted the record $1.91 billion adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). In the fourth quarter (Q4) of 2023, net earnings and available cash rose 24.64% and 53% to $86 million and $181 million compared to Q4 2022.
For 2024 and beyond, Parkland will continue to execute its accretive organic initiatives. The company will enhance the digital platform in the retail segment and grow the “ON the Run” program through a differentiated food offer. Besides expanding the renewable business, the multi-product offerings should help the commercial segment grow fuel volumes.
Last, Parkland will optimize logistics capabilities and expand supply optionality while leveraging scale to grow purchasing power. In 2023, the retail business (42%) contributed the most to the record adjusted EBITDA, followed by commercial (36%) and refining (22%).
Oil & gas equipment & services
Thus far, in 2023, Total Energy is flying high. At $10.01 per share, current investors enjoy a 32.41% market-beating return on top of the 3.69% dividend. Based on market analysts’ buy rating, the average upside potential in one year is 245.69% ($35).
The $400 million diversified energy services supplier operates in Canada and internationally. Its four business lines provide equipment and expertise for customers’ drilling, completion, production, transportation, oil and gas process equipment, and natural gas compression needs.
In 2023, net income, revenue, and cash flow increased 9%, 17%, and 25% year over year to $41.6 million, $892.4 million, and $163.3 million. At year-end, Total Energy had $123.4 million of positive working capital and a $162.8 million sales backlog.
Management maintains a positive outlook due to relatively stable industry conditions. The completion of several liquefied natural gas export facilities should also provide relief to North America’s natural gas market.
The energy slump is over
Industry experts believe Canada’s energy sector slump is over. Parkland and Total Energy Services, in particular, will likely outperform and deliver outsized capital gains in addition to stable quarterly dividends.
The post If I Were You, I’d Buy These 2 Stocks Before They Skyrocket appeared first on The Motley Fool Canada.
Should you invest $1,000 in Parkland Fuel Corporation right now?
Before you buy stock in Parkland Fuel Corporation, consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Parkland Fuel Corporation wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $17,988!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.
See the 10 stocks * Returns as of 1/24/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Total Energy Services. The Motley Fool has a disclosure policy.
2024
