We recently published a list of 7 Cheap Energy Stocks To Buy Under $20. In this article, we are going to take a look at where Liberty Energy Inc. (NYSE:LBRT) stands against the other cheap energy stocks to buy under $20.
The energy sector is undergoing a major transformation in 2024, driven by a combination of evolving market dynamics, fluctuating commodity prices, and the increasing role of renewable energy sources. As investors navigate this changing environment, they are met with both opportunities and challenges. While oil prices show signs of stability, renewable energy adoption continues to gain momentum, creating a unique landscape for energy stocks.
Brent crude oil prices are expected to stabilize around $82 per barrel, reflecting a slight uptick from $81 in 2023. This stabilization signals a return to pre-pandemic levels, a trend supported by strategic production cuts from OPEC+. Market analysts predict that these cuts will help maintain the delicate balance between supply and demand, which is pivotal in shaping the oil markets in 2024. Meanwhile, the average retail gasoline prices are forecasted to remain steady at $3.30 per gallon over the next two years. This stability, combined with the growth in U.S. crude oil production—from 12.9 million barrels per day in 2023 to an anticipated 13.3 million barrels per day in 2024—reflects a strong domestic supply environment.
In addition to crude oil, the U.S. liquefied natural gas (LNG) sector is expected to witness robust growth. Gross LNG exports are projected to increase from 12 billion cubic feet per day in 2023 to 14 billion in 2025, highlighting the U.S.’s evolving role as a significant player in the global energy markets. The rise in LNG exports is likely to boost the country’s influence in international energy trade, positioning it as a key energy exporter in the coming years.
Natural gas prices at Henry Hub are also poised for changes. While prices are expected to stay relatively stable at $2.20 per million British thermal units (MMBtu) in the near term, they are projected to surge to around $3.10/MMBtu in 2025. This increase reflects the interplay between the rising production capabilities and the growing export demands of the U.S. energy sector. Notably, the shift toward biomass-based diesel products, which now account for 9% of total distillate fuel consumption, underscores the sector’s movement toward more sustainable fuel options amid growing environmental concerns.
The electricity generation landscape in the U.S. is also seeing significant shifts. While natural gas remains the primary source, contributing 42% of total electricity generation, the share of renewables is increasing rapidly—from 21% in 2023 to an expected 25% by 2025. Solar energy, in particular, is leading this charge. The first half of 2024 saw solar energy account for 59% of new generating capacity additions, driven largely by advancements in battery storage technologies. States like Texas and California are expected to be at the forefront of solar generation, reflecting the broader trend of transitioning to green energy.
These shifts in the energy landscape are supported by a steady economic environment. The U.S. GDP is projected to grow by 2.6% in 2024, providing a solid backdrop for energy market developments. However, CO2 emissions are forecasted to remain steady at 4.8 billion metric tons, emphasizing the ongoing challenges of balancing energy production with environmental sustainability. As climate change becomes a more pressing issue, energy companies are under increasing pressure to innovate and adopt more sustainable practices.
Geopolitical tensions, such as the political instability in Libya, add another layer of complexity to the energy markets. These events can lead to unexpected production outages, influencing global oil supply and prices. Despite these uncertainties, the energy sector’s fundamentals appear strong, offering promising opportunities for discerning investors. The combination of ongoing production cuts by OPEC+ and strong demand from non-OECD countries is expected to drive an increase in oil consumption, enhancing the appeal of energy stocks in 2024.
Given this backdrop, identifying the best energy stocks under $20 becomes crucial for investors looking to capitalize on the anticipated shifts in the sector. The companies featured in this analysis are well-positioned to benefit from the evolving energy landscape.
Our Methodology
For this article, we utilized the Finviz stock screener to identify stocks within the energy sector that have forward price-to-earnings (P/E) ratios below 15 as of September 29. From this initial list, we focused on seven stocks that are most favored by institutional investors. These stocks were then ranked in ascending order of the number of hedge funds holding stakes in them, as of Q2 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).
A worker in protective gear near a large natural gas exploration machinery.
Liberty Energy Inc. (NYSE:LBRT)
Number of Hedge Fund Holders: 31
Forward P/E Ratio as of September 29: 7.57
Liberty Energy Inc. (NYSE:LBRT) is a key player in the energy services industry, specializing in providing hydraulic fracturing services and related technologies to oil and gas exploration companies across North America. The company was founded in 2011 and is headquartered in Denver, Colorado. With a forward P/E ratio of 7.57, the stock presents an attractive valuation, making it a solid addition to a list of cheap energy stocks to consider under $20. Liberty Energy Inc. (NYSE:LBRT) operates in several key shale basins, including the Permian Basin, Williston Basin, and Eagle Ford Shale, among others. The company also has an extensive portfolio of assets, comprising approximately 40 active hydraulic fracturing fleets and two sand mines, which position it strongly within the energy services sector.
For the second quarter of 2024, Liberty Energy Inc. (NYSE:LBRT) reported revenue of $1.2 billion, up by 8% from the previous quarter, and adjusted EBITDA of $273 million, a 12% sequential increase. The company achieved these results despite a slight decline in industry-wide drilling and completions activity, underscoring its operational efficiency and robust business model. Liberty Energy Inc. (NYSE:LBRT) average daily pumping efficiencies and record safety performance were key contributors to its strong performance, reflecting its competitive edge and industry leadership. The company also recorded a 28% adjusted pre-tax return on capital employed over the trailing 12 months ending June 30, 2024, highlighting its commitment to maximizing shareholder value.
In addition, Liberty Energy Inc. (NYSE:LBRT) generated substantial cash flow, distributing $41 million to shareholders in the second quarter alone. Since reinstating its capital return program two years ago, the company has returned $458 million to shareholders, further demonstrating its strong financial health and shareholder-friendly approach. The stock is also seeing increased interest from institutional investors, with 31 hedge funds holding positions in Liberty Energy as of Q2 2024, up from 30 in the previous quarter.
Liberty Energy Inc. (NYSE:LBRT) ongoing investments in innovative technologies, such as its AI-empowered logistics platform, Sentinel, and natural gas-fueled pumping and power generation technologies, continue to drive efficiency and cost reductions for the company and its clients. With favorable industry trends and a disciplined capital allocation strategy, Liberty Energy Inc. (NYSE:LBRT) is well-positioned to continue delivering solid financial and operational results, making it a compelling choice for investors looking for cheap energy stocks with strong growth potential.
Overall LBRT ranks 5th on our list of cheap energy stocks to buy under $20. While we acknowledge the potential of LBRT 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 LBRT 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.