Natural gas prices are at their highest level since February 2021.
Now, my team and I think renewable energy will be one of the most lucrative mega trends of the next decade. (If you agree, click here to check out Chief Investment Strategist Adam O’Dell’s “Infinite Energy” presentation!)
But we’re well aware of the massive profits we can make in traditional forms of energy, such as oil and natural gas.
Russia’s war in Ukraine put a crimp on the oil and gas supply in Europe.
Here in the U.S., on the other hand, inflation and rising oil costs added pressure.
According to the American Automobile Association, the average price of a gallon of gas in the U.S. is $4.57.
In February, it was just $3.54.
The world’s attitude toward oil and gas has shifted from globalization (getting it from anywhere) to regionalization (only getting it from trusted countries).
In the U.S., we are looking at ways to explore our own oil and gas capacity rather than outside sources.
This chart shows the difference between the amount of gas produced offshore (think: at sea) compared to onshore (think: on land).
The amount of gas produced onshore is growing, while the amount of gas produced offshore is shrinking.
This tells me that the U.S. will continue to look inward for companies supplying oil and natural gas for years.
Today’s Power Stock produces oil and natural gas in the U.S.: SandRidge Energy Inc. (NYSE: SD).
SD holds an interest in 817 wells operating across 368,000 acres in Oklahoma and Kansas.
SandRidge stock scores a “Strong Bullish” 95 out of 100 on our Stock Power Ratings system, and we expect it to beat the broader market by 3X in the next 12 months.
SD Stock: Small Size Is an Advantage
Taking a closer look at SD, two items piqued my interest:
- In 2021, the company reported total revenue of $168.9 million — a 47% year-over-year increase!
- Last year, SandRidge returned 129 wells to production after the oil price dropped in 2020, which increases the company’s capacity to drill for oil.
With a market cap of $751.4 million, SD is far from the biggest oil and gas producer in the U.S.
However, it’s one of the highest-quality stocks in the sector.
Take a look at the table below.
SD’s small size means it has a much larger runway for growth than massive Big Oil stocks!
SD Stock: Terrific Quality + Value
Its return on assets is a healthy 34.8%. Contrast that with the fossil fuel exploration sector average, which is negative 0.7%.
The company’s net margin is a solid 60.4%. Its peers, on the other hand, average just 3%.
It’s clear why SD scores a 97 on our quality metric.
SD stock is a solid value as well. Its price-to-earnings (P/E) ratio is a reasonable 6.6. Its peers are more expensive, averaging a P/E ratio of 9.6.
You can see in the chart above that SD stock has had a strong run, reaching a new 52-week high in mid-May.
Despite broader market pressures, the stock is up 277.8% over the last 12 months. That triples its peers’ stocks, which are up 95.6% during the same time.
SandRidge Energy Inc. stock scores a 95 overall on our proprietary Stock Power Ratings system.
That means we’re “Strong Bullish” and expect it to beat the broader market by at least three times in the next 12 months.
While the world transitions to more renewable energy, the need for oil and gas isn’t going away.
And with the U.S. looking at more onshore oil and gas production, SandRidge will remain in demand.
Stay Tuned: Top Digital Ad Stock for Tech Profits
Remember: We publish Stock Power Daily five days a week to give you access to the top companies that our proprietary Stock Power Ratings identify!
Stay tuned for the next issue, where I’ll share all the details on an innovative digital advertising tech stock to buy.
Matt Clark, CMSA®
Research Analyst, Money & Markets
P.S. Got a comment about Stock Power Daily for my team and me? You can reach us at Feedback@MoneyandMarkets.com!