Feb 12, 2022 - Jack Dalton
Top 3 Energy Stocks for 2022:
Oil stocks are currently crushing it in the first couple of months of 2022 and many people think that they can continue to perform well through 2022.
Firstly, a study be Deloitte estimates that the price of oil will decrease by 2.88% per year until 2026 (which would be terminal year for most DCF's). This estimate in and of itself is most likely low, however for the sake of this argument we will assume it is valid. Deloitte's decrease makes CHV look like a “bad buy”, however, analysts are currently assuming the CVX's revenues to decline by 4.9% per year over the next 5 years. This would indicate that the current analyst price target of $141 is undervaluing CVX (and the analyst price target of $141 is above the current stock price right now, implying that it is already a little undervalued).
Furthermore, the stock godfather, Warren Buffet, increased his stake in Chevron in Q3 2021 by 25%. This was one of his only buys during the last half of 2021, and his strongest conviction play.
Lastly, I like Chevron due to the fact that they have been able to grow their dividend steadily, especially over the past couple of years. This is a feat that not many other large oil companies have been able to achieve.
Personally, I think that Chevron is the best pick for the energy sector in 2022. As a result of this I decided to do a full-length analysis. If you reinterested in reading this you can do so here.
Cameco produces and sells uranium worldwide. Currently, Cameco sells their uranium and fuel services to nuclear utility companies/generators worldwide. Cameco offers a small dividend (0.3%) that has grown over the past 2 years.
Firstly, Cameco has several future client prospects for 2022 as there are currently 51 nuclear reactors under construction. Upon these 51 projects being completed, the global reactor fleet will have increased by 11.5%. This gives Cameco plenty of opportunities in the near future to capture market share, and increase their revenues, which should help their stock price greatly.
Additionally, Uranium is a renewable resource, and due to uranium being carbon free, Cameco has been able to achieve net-zero emission status. Furthermore, using uranium in the nuclear process in the long-term is expected to have the lowest LCOE of any energy production method (even traditional methods like oil and gas). The greatest threat to Cameco is people not trusting nuclear, citing rare incidents of nuclear failure, however, if there is a general/global acceptance of nuclear technologies Cameco is set to fly.
From a financial standpoint, Cameo has enough cash to cover all of their long term debt, which is very healthy. Furthermore, their quick/current ratios are 5 and 6.3 respectively, which again indicates a health balance sheet.
Green Plains produces and sells Ethanol Internationally. Green plains has 31 ethanol storage facilities, 6 terminal fuel facilities, and 2,480 leased railcars.
Overall, Green Fields has good financial ratios, however their level of debt is a bit concerning as their Debt to Equity is 0.75.
Green plains plan to their MSC and Clean Technologies to create Ultra-High Protein, Corn Oil, Ethanol, DDG's (dried distiller's grains), specialty alcohols, and/or dextrose. All of these product offerings are very low emissions which makes GPRE an ESG play. Furthermore, Green Fields also has one of the largest Carbon Capture & Sequestration platforms in the world.
Green Fields sees their Ultra-High Protein as their largest growth driver over the next 5 years, with many advancements and projects planned. Furthermore, they are expecting their Sustainable corn oil and clean sugar technologies to have high growth rates as well.
If all goes to plan, Green Fields is forecasting an EBITDA in the ballpark of $600M in 2024. I found some interesting data from a different company “Enel” which also operates in the sustainable landscape, who is forecasting their EV/EBITDA to be 7x in 2024. Applying this logic to Green Field's expected 2-24 EBITDA, we can estimate their EV to be $4.2 billion, which is an implied increase of 136% from their current EV of $1.8 billion. If we discount this back to today, we can expect a 33% CAGR in their stock price over the next 3 years (until the end of 2024).