We recently compiled a list of the 7 Best Canadian Stocks Under $20. In this article, we are going to take a look at where Veren Inc. (NYSE:VRN) stands against the other Canadian stocks under $20.
What’s Happening in the Canadian Stock Market?
The Canadian economy is beginning to settle down as inflation is on a steady downward trend and the Bank of Canada has also taken an easier policy stance, thereby paving the way for stronger economic growth moving forward. On July 19, Reuters reported that the Bank of Canada cut its overnight interest rates by 25 basis points to 4.5% based on the expectation that inflation will continue to fall.
Inflation rates in Canada cooled a little more than expected making interest rate cuts more likely. On July 16, as per Reuters, June 2024 Consumer Price Index (CPI) cooled down to 2.7% a 0.1% decrease month-over-month thereby paving the way for an interest rate cut.
As a result of the interest rate cut, the Canadian stock market was seen performing better. On August 16, Reuters reported that the Canadian stock index ended higher on Friday and witnessed its biggest weekly advance of the year. Investors globally have been cheering the recent signs of the US economic resilience and the recent record high gold prices also boosted the mining sector
The S&P/TSK composite index ended up 0.1% at 23,054.61, posting a seven-day gain streak, recorded as the longest daily winning streak since April 2023.
Looking at a sectoral analysis, the materials group that comprises metal minerals and fertilizer companies was up 1.5% as the price of gold went up by 2% to an all-time high. Moreover, the financial market, which contributed 29% to TSK weighting, grew by 0.6%. The energy sector was a drag, however, and fell 1.1% due to lower oil prices, which settled at $76.65 1.9% lower than expected. The weaker price of oil was mainly attributed to slower demand from China.
On August 13, Ross Healy, chairman of Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, appeared on Bloomberg to discuss the performance of TSK and the US stock market. Ross Healy, mentioned that the Canadian stock market is trading at 1.5 times its adjusted book value, whereas the NASDAQ is trading at 9.5 times its book value. Mentioning these numbers Ross Healy, stated that for investors looking to invest for 5 years or longer, the Canadian stock market looks more lucrative due to its potential for growth and the portfolio of stocks it has to offer.
Ross Healy, further believes that we have had a long US advantage and now the market is heading towards a Canadian advantage. Moreover, the precious metal and gold options in the TSK index make the market poised for growth in the long term. Ross Healy, while stating his bull case for gold companies mentioned that companies that have good money on their balance sheets and have been able to find underdeveloped projects to work on have been successful when compared to their competitors.
Our Methodology
To compile the list of 7 best Canadian stocks under $20 we used the Finviz screener. We used the screener to filter out Canadian Stocks that were trading under $20 and sorted them by their market capitalization to get a consolidated list of stocks. Next, we ranked these stocks based on the average price target upside as per Wall Street analysts. The stocks are ranked in ascending order of the average price target upside, as of August 18. Moreover, we have also mentioned the share price of each stock as of August 18, 2024.
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).
Oil and natural gas pumps glowing in the sunrise, symbolic of the company’s power.
Veren Inc. (NYSE:VRN)
Average Price Target Upside as of August 18: 47.47%
Share Price as of August 18: $7.35
Veren Inc. (NYSE:VRN) operates as an oil and natural gas exploration and producing company with operations mainly in the United States and Canada. The company mainly focuses on the Exploration and Production (E&P) segment of the industry and searches for resources such as Crude Oil, Tight Oil, Natural Gas Liquids, and other related petroleum products.
Three main sites including Alberta Monteny, Kaybob Duvernay, and Saskatchewan produced 50%, 25%, and 25% of the company’s total production in 2024.
Veren Inc. (NYSE:VRN) is poised for growth, we say this not only because the company posted a successful Q2 2024, but has grown its revenue by 23% during the past 3 years. In Q2, 2024, the company generated $195 million in excess cash flow. The excess cash flow was driven by an impressive production rate of 192,500 barrels of oil per day. The production rate indicated a slight increase subsequently and was in line with the production guidance of 191,000 to 199,000 BOE per day. The success in production rates is attributed to strong performance in Alberta Montney and Kaybob Duvernay regions.
Management proved its discipline in allocating the excess cash flow by returning 60% of it to shareholders through dividends and buybacks. Whereas, 40% was used to reduce debt and in reinvestments. Since the start of 2024, Veren Inc (NYSE:VRN) has been able to reduce its debt by $800 million.
Should you invest in Veren Inc. (NYSE:VRN)?
The company has improved its production capacity and is on the road to achieving its production target. In addition, Veren Inc. (NYSE:VRN) has also improved its efficiency and operational cost. For instance, recent drilling results in the Montney Formation exceeded expectations, with some wells producing up to 1,300 BOE per day.
VRN is cheap at current levels and presents an attractive entry point. It is trading at 6 times its forward earnings, a 48% discount to its sector. Moreover, 13 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $11 presenting an upside of 47.47% from the current level.
Overall VRN ranks 3rd on our list of the best Canadian stocks under $20. While we acknowledge the potential of VRN 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 timeframe. If you are looking for an AI stock that is more promising than VRN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.