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 Vermilion Energy Inc. (NYSE:VET) 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).
An oil rig in the middle of the ocean, its towering structure standing stout in the horizon.
Vermilion Energy Inc. (NYSE:VET)
Average Price Target Upside as of August 18: 42.27%
Share Price as of August 18: $10.20
Vermilion Energy Inc. (NYSE:VET) is an international producer of petroleum and natural gas. It operates through acquiring, exploring, and developing petroleum and natural gas reserves. The operations of Vermilion Energy Inc. (NYSE:VET) are spread across Canada, the United States, Europe, and Australia. The company mainly sells its products to refineries, industrial customers, and the international market.
The company posted a successful second quarter of 2024, hitting the higher end of its production guidance. The production for the quarter averaged 84,974 barrels of oil per day, which was a 2% increase year-over-year and almost touching the top end of its Q2 guidance of 83,000 to 85,000 barrels of oil per day per day. The increase in production was mainly due to the company’s early startup of its BC Montney Battery. For perspective, Vermilion Energy Inc. (NYSE:VET) has been constructing a 16,000 barrels of oil per day battery in the Mica area Montney formation in British Columbia, Canada. The BC Montney Battery is a key growth prospect for the company as it will provide an avenue to expand future expansion to 28,000 barrels of oil per day as the company builds its assets.
Moreover, the company was also able to reduce its net debt by $38 million during the quarter indicating management’s commitment to improve its fundamentals.
Is Vermilion Energy Inc. (NYSE:VET) a good investment?
The strength of Vermilion Energy Inc. (NYSE:VET) lies in its ability to grow its business on a global scale. During the Q2 of 2024, the company’s production from international operations averaged 29,987 barrels of oil per day per day and this was despite its scheduled maintenance. What’s more impressive is its operations in the European market. The company has been able to start the SA-10 plant in Croatia in addition to 5 successful explorations in Europe as a whole. As a result of management’s efforts the company has grown its European natural gas production by over 15% during the past 2 years, this is expected to contribute further growth as European gas represents 40% of its total gas production.
If we look at the past 10 years’ performance, VET has been able to grow its revenue by 3% and its levered free cash flow by 16%, indicating robust performance and profitability. Although the stock is trading at a premium to its sector, its earnings are expected to grow by 112.26% during the year to reach $0.44. 12 analysts have a Consensus Buy rating on the stock, with their 12-month median price target of $14.51 presenting an upside of 42.27% from the current level.
Overall VET ranks 4th on our list of the best Canadian stocks under $20. While we acknowledge the potential of VET 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 VET 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.
