Suncor Energy Inc. (USA) (SU), Enbridge Inc (USA) (ENB): Should You Follow Warren Buffett Into This Energy Stock?

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A reasonable price
Finally, Suncor Energy Inc. (USA) (NYSE:SU) has obvious appeal for those hunting for inexpensive energy stocks as it trades at a discount to most of its peers on several metrics. Given that Suncor is one of the cheapest oil producers in Canada, it should be no surprise that an investor like Buffett would view it as an opportunity.

Company EV/EBITDA Price/Book Price/Cash Flow Yield
Suncor Energy 4.77 1.27 5.87 2.29%
Imperial Oil 6.19 1.35 9.78 1.13%
Husky Energy 4.91 1.47 5.55 4.03%
Cenovus Energy 5.72 2.23 6.33 3.29%
Canadian Natural Resources 4.71 1.40 5.80 1.59%

Source: yCharts.com

Expect Suncor Energy Inc. (USA) (NYSE:SU)’s multiple to grow going forward as spending discipline increases shareholder returns while freeing capital for dividend hikes and share buybacks. These could all serve as catalysts to close the valuation gap.

Foolish bottom line
Suncor Energy Inc. (USA) (NYSE:SU) has a smart management team implementing a straightforward turnaround: invest only in projects that provide a sufficient return for investors and return the leftover capital to shareholders. Warren Buffett’s purchase is a vote of confidence in this new strategy. And with the stock is still trading at a discount to its peers, there’s still good reason to join the Oracle of Omaha.

The article Should You Follow Warren Buffett Into This Energy Stock? originally appeared on Fool.com.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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