We recently published a list of 8 Most Undervalued Oil Stocks To Buy According To Analysts. In this article, we are going to take a look at where Ring Energy, Inc. (NYSE:REI) stands against other most undervalued oil stocks to buy.
The energy sector is buzzing with change in 2024, creating a mix of exciting opportunities and new challenges for investors. As the world embraces renewable energy sources and oil prices stabilize, the market finds itself at a fascinating crossroads. Oil is no longer the untouchable giant it once was, but it’s far from fading away. Instead, it’s adapting to new realities, with smart investors eyeing undervalued oil stocks that still hold potential amidst this evolving landscape.
Brent crude oil prices are expected to hover around $82 per barrel, slightly up from $81 in 2023. This points to a return to pre-pandemic price levels, thanks to OPEC+ strategically limiting production to maintain supply-demand equilibrium. At the same time, retail gasoline prices should stay stable at around $3.30 per gallon, offering some predictability in fuel costs. Meanwhile, U.S. crude oil production is on the rise, with output expected to jump from 12.9 million barrels per day in 2023 to 13.3 million barrels per day in 2024. All signs indicate that the U.S. is gearing up to remain a key player in the global oil game.
While the U.S. economy is forecasted to grow by 2.6% in 2024, energy companies are under pressure to strike a balance between boosting production and addressing environmental concerns. The world’s demand for energy continues to rise, and geopolitical tensions add another layer of unpredictability to the market. Political unrest in countries like Libya, for instance, has raised concerns about potential disruptions in global oil supply. But even with these uncertainties, the fundamentals of the oil industry remain solid, and analysts believe that strategic production cuts by OPEC+, coupled with strong demand from developing nations, will keep oil stocks attractive.
Interestingly, oil and gas companies are ramping up their investments to meet future demand. A report by the International Energy Forum and S&P Global Commodity Insights suggests that upstream investments will need to grow by $135 billion annually to ensure a stable supply by 2030. With North America and Latin America expected to take the lead in capital expenditures, the industry is witnessing a resurgence in investment activity. Brazil and Guyana, in particular, are emerging as major contributors, reinforcing the importance of the Americas in the global oil supply chain.
Despite the rise of renewable energy, oil remains indispensable for the foreseeable future. The current environment offers a sweet spot for investors looking to take advantage of undervalued oil stocks. While these stocks often carry higher risks due to their smaller market caps, they also come with significant upside potential. As global oil consumption continues to grow, driven by the energy needs of both developed and emerging economies, savvy investors are positioning themselves to benefit from this ongoing demand.
In this dynamic setting, the search for hidden gems in the oil sector becomes even more exciting. The eight undervalued oil stocks highlighted in this article reflect both the resilience of traditional energy markets and the opportunities arising from a changing global landscape. For those looking to navigate the energy transition while still capitalizing on the growth of oil demand, these stocks present an intriguing opportunity.
Our Methodology
For this article, we use stock screeners to identify nearly 20 stocks in the oil industry that have a buy or better rating from analysts with a forward Price to Earnings (P/E) ratio of less than 15 and price target above current market price as of October 14, 2024. Next, we narrowed our list to 8 stocks with the highest upside potential. We also mentioned the number of hedge fund holdings for each stock as well. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of 912 hedge funds. The eight undervalued oil stocks are listed in ascending order of their upside potential.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An oil rig under construction in the middle of a lake, its lights reflecting on the surrounding water.
Ring Energy, Inc. (NYSE:REI)
Upside Potential: 83%
Forward Price to Earnings (P/E) ratio: 3.49
Number of Hedge Fund Holders: 11
Ring Energy, Inc. (NYSE:REI) is an attractive pick for our list of 8 most undervalued Oil stocks to buy according to analysts, boasting a forward P/E ratio of 3.49 as of October 14, 2024. With a target price of $3.00 and the stock currently trading at $1.64, it offers an impressive 83% upside potential. Headquartered in The Woodlands, Texas, Ring Energy, Inc. (NYSE:REI) focuses on acquiring, developing, and producing oil and natural gas across a strategic land base of 56,711 net developed acres and 2,668 net undeveloped acres. Its operations are centered in key Texas counties such as Andrews, Gaines, and Ward, along with additional assets in Lea County, New Mexico—prime locations in the prolific Permian Basin, which accounts for nearly half of the U.S. daily oil production.
Ring Energy, Inc. (NYSE:REI) Q2 2024 results highlight the company’s solid financial and operational performance. The company reported net income of $22.4 million, translating to $0.11 per diluted share, with adjusted net income slightly higher at $23.4 million, or $0.12 per share. Total sales volumes came in at 19,786 barrels of oil equivalent per day (BOEPD), a 4% increase from the previous quarter, driven by robust oil production averaging 13,623 barrels per day—a 2% jump from Q1 and exceeding prior guidance.
The company’s ability to generate cash is another strong point, posting $37 million in adjusted free cash flow during the first half of 2024—up 60% year-over-year. This growth was partly fueled by the strategic acquisition of Founders in August 2023, which has strengthened Ring’s foothold in the oil market. Operationally, Ring Energy, Inc. (NYSE:REI) also completed 11 wells in Q2, keeping pace with its production targets and enhancing future output potential.
Ring Energy, Inc. (NYSE:REI) market confidence is rising, with hedge fund interest increasing to 11 holders by the end of Q2, up from nine in the previous quarter. With the U.S. Energy Information Administration forecasting an 8% rise in Permian Basin crude output in 2024, Ring Energy, Inc. (NYSE:REI) focus on high-value formations aligns perfectly with broader market trends. As the company scales production and maintains operational efficiency, it stands out as a compelling choice among undervalued oil stocks with significant upside potential.
Overall, REI ranks 3rd on our list of most undervalued oil stocks to buy according to analysts. While we acknowledge the potential of REI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than REI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.