On the surface, the concept of oil stocks to buy seems rather irrelevant. After all, the political and ideological winds push renewable energy sources like wind and solar. In addition, electric vehicles stand poised to take over the transportation and mobility paradigm.
Still, these factors don’t necessarily mean that oil stocks are irrelevant. Far from it, the sector could enjoy a resurgence, even with a possible recession looming. First, the world still runs on hydrocarbons. Even with the addition of wind and solar, the intermittency of these power sources won’t adequately address rising population trends.
Second, while EV integration is robust, most people still drive combustion cars. Further, the expense of EVs continues to limit their full potential. And finally, geopolitical factors – such as coordinated production cuts – may artificially limit supply and thus bolster demand.
With that in mind, below are high-potential oil stocks to buy.
Oil Stocks to Buy: Baytex Energy (BTE)
If you don’t mind, we’re going to get right into the data, beginning with Baytex Energy (NYSE:BTE). Specializing in the acquisition, development and production of crude oil and natural gas, Baytex may only be up a hair on a year-to-date basis. Still, in the past six months, BTE gained almost 16%. Given the underlying conditions, shares could swing even higher.
For one thing, Baytex benefits from solid top-line expansion. Per investment data aggregator Gurufocus, the company’s three-year revenue growth rate comes in at 16.5%, above 62.53% of its peers. Also, its EBITDA growth rate during the same period was 26.5%, above nearly 64% of the competition.
To be fair, Baytex suffered a hefty net loss of $1.9 billion in 2020. And prior to that, its profitability has been shaky. Still, management has done much to improve the bottom line, potentially making it a contrarian idea for oil stocks to buy.
Finally, analysts peg shares as a moderate buy with a $5.04 average price target, implying almost 21% upside.
Vermilion Energy (VET)
An international oil and gas producer, Calgary, Canada-based Vermilion Energy (NYSE:VET) might not get much love from stateside investors. Indeed, since the beginning of this year, VET fell more than 6%. In the past 365 days, the security tanked over 29%, posing concerns for onlookers. Still, a trailing six-month performance of over 12% might give hope to contrarians.
A look at the financials may help shift some sentiments. For example, Vermilion’s three-year revenue growth rate comes in at 21.7%, outflanking 73.2% of its oil and gas peers. Also, during the same period, its EBITDA growth rate lands at 40.9%. This stat outpaces 78.17% of other competing oil stocks.
What should also not be ignored is its profitability. Specifically, the company commands excellent profit margins, most notably an operating margin of nearly 45%. This stat soars above 86.69% of rivals. Better yet, VET trades at only 5.92x forward earnings.
Lastly, analysts rate VET a moderate buy with an $18.90 price target, implying over 31% growth potential.
Vertex Energy (VTNR)
Headquartered in Houston, Texas, Vertex Energy (NASDAQ:VTNR) is a specialty refiner and marketer of high-quality hydrocarbon products. Mainly, Vertex focuses on the aggregation, re-refining, and processing of distressed hydrocarbon streams. Historically, the company processed used fuel oils. Through its services, Vertex is able to mitigate the environmental impact of expended materials.
To be clear, VTNR ranks among the riskiest oil stocks to buy. Since the January opener, shares tumbled almost 25%, which goes against the broader hydrocarbon energy sphere. Nevertheless, VTNR also appears to have hit a bottom. In the trailing one-month period, the security bounced up nearly 5%.
Now, prospective investors should know that Vertex suffers some shaky financial metrics, most notably the issuance of new debt. However, what’s interesting here is that in September, the net sentiment within Fintel’s options flow screener – which targets big block trades – appears to be bullish.
In closing, analysts peg VTNR a moderate buy with a $7.92 price target, implying over 76% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
