Diamondback Energy: A Cheap Oil And Gas Stock With More Fuel Left In The Tank
2022.05.13 11:26
Diamondback Energy (NASDAQ:FANG) is one of the largest crude oil and natural gas producers of the Permian Basin—the region that spans between western Texas and southeast New Mexico and accounts for approximately 30% of total domestic oil output. Its strategic positioning and consolidated market share make it a major player in the U.S. energy sector.
Powered by a favorable macro environment for its core business, which includes exploring, developing, and producing oil, gas, and natural gas liquids, the company gained around 59% over the last 12 months, reaching a market cap of $22.4 billion. After reaching an all-time high of $147.99 on Mar. 25, FANG closed Thursday at $127.04.
FANG Daily
With a near-perfect financial health score of 4/5 and an extremely attractive valuation, Diamondback Energy fits the bill as a solid name to own amid the current environment.
Score
Strong Fundamentals
Diamondback Energy’s stock has a comparatively low price-to-earnings (P/E) ratio of 8.2, making it cheaper than other notable names in the thriving energy sector, such as EOG Resources (NYSE:EOG), Pioneer Natural Resources (NYSE:PXD), Devon Energy (NYSE:DVN), and Continental Resources (NYSE:CLR).
also highlights several additional tailwinds the energy company currently has, including solid earnings and cash flow growth, allowing management to continue to return capital to shareholders in the form of higher dividend payouts and stock buybacks.
Indeed, the oil-and-gas company offers a relatively high annualized dividend of $2.80 per share at a yield of 2.24%, more than the implied yield for the S&P 500, currently at 1.55%.
FANG Company Profile
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 both the Dow Jones Industrial Average and the S&P 500.
Not surprisingly, Diamondback’s stock could see an additional upside of approximately 62% in the next 12 months, according to the model, bringing it closer to its fair value of $205.76 per share.
FANG Fair Value
Analysts are also optimistic about the company’s long-term perspectives, citing strong energy market fundamentals. The average analyst price target is $178.79, representing an upside of 40.7% from current levels.
FANG Consensus Estimates
Bottom Line
Diamondback should continue to benefit from improving energy market fundamentals, especially as crude oil and natural gas prices hover near multi-year highs.
