We recently compiled a list of the 10 Most Profitable Value Stocks To Invest In. In this article, we are going to take a look at where Coterra Energy Inc. (NYSE:CTRA) stands against the other most profitable value stocks to invest in.
Rotating Back to Value Sectors is the Better Option
Value investing is essentially focused on looking at stocks trading at a discount to their intrinsic value. Such stocks happen to be more mature, less volatile, and have strong fundamentals. 2024 has been significant for defensive and value stocks, especially considering that growth stocks have been trading at high valuations all year round. Analysts expect the Magnificent Seven to shed their valuation significantly and investors continue to remain cautious amid a turbulent market environment.
On October 22, Brian Mulberry, Zacks Investment Management client portfolio manager, joined Wealth! on Yahoo Finance to discuss his market thesis and share why he prefers value stocks over growth stocks under the current macroeconomic backdrop. The S&P 500, in terms of the broader market, is currently trading at 22 times its forward earnings. Speaking of the magnificent seven, their valuations are getting a bit “top-heavy” and have been consistently trading between the mid to high 30s, adds Mulberry.
READ ALSO: 10 Stocks with Consistent Growth to Buy and 8 Most Undervalued Value Stocks To Buy According To Analysts.
On the flip side, looking at utilities’ earnings growth and forward P/E, these companies are trading at a FWD P/E of only 9 or 10. Additionally, within these sectors, multiple better-performing individual stocks are expected to post sustainable or “durable earnings growth.”
Mulberry suggests that investors can do much better at current valuation levels if they are rotating back to some traditional sectors and value stocks. He adds that the big banks also expect to report strong earnings and will continue to do so as the interest rates go down even further in 2025.
Value stocks not only have stronger fundamentals, but they also have legacy businesses with sustainable business models. With the current backdrop of uncertainty, many analysts and strategists alike believe that low-risk and value businesses are the best bets for investors. That said, let’s take a look at the 10 most profitable value stocks to invest in.
Our Methodology
To come up with the 10 most profitable value stocks to invest in we used the Finviz stock screener to identify stocks in value-oriented sectors like consumer staples, financials, energy, healthcare, and more, with forward PE ratios of less than 15, positive 10-year revenue growth rates, and positive trailing 12-month net income. We then examined the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q2 2024 primarily and 10-year revenue growth rates, forward P/E, and TTM net income secondarily.
Why are we interested in 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 pumping under the open sky of the Permian Basin.
Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 48
Forward P/E as of October 23, 2024: 13.7
10 Year Revenue Growth Rate: 10.9%
Trailing 12 Month (TTM) Net Income (June 30): $1.31 Billion
Coterra Energy Inc. (NYSE:CTRA) is a diversified energy company that ranks seventh on our list of the most profitable value stocks to invest in. The oil and gas company is engaged in the development, exploration, and production of oil, natural gas, and natural gas liquids in the United States.
During the second quarter of 2024, Coterra Energy’s (NYSE:CTRA) net income hit $220 million, and cash flow from operating activities was recorded at $558 million. In addition to that, oil and natural gas production exceeded the high end of expectations, and capital expenditures were close to the low end of the guidance. Consequently, the company has increased guidance of total barrels of oil equivalent (BOE) production by 1% and oil production by 2.4% for the full year 2024.
Overall, Coterra Energy Inc. (NYSE:CTRA) is an investor’s favorite because it is committed to returning 50% of free cash flow or more to shareholders and has returned 103% year-to-date.
Coterra Energy Inc. (NYSE:CTRA) has exceptionally strong fundamentals, contributing to its ranking on our list. Not only that, but the company also has a well-planned and thought-out plan. For the second half of 2024 and 2025, the company is committed to making significant investments in oil and gas. Analysts are bullish on the stock and their median price target represents an upside of 29% from current levels.
Overall CTRA ranks 7th among the 10 most profitable value stocks to invest in. While we acknowledge the potential of CTRA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CTRA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
