Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

What are we looking for?

The energy sector remains the worst performing sector year-to-date with the Energy Select Sector SPDR Fund (XLE) down 36 per cent. Interestingly, over the past month the sector has rebounded an impressive 16 per cent, outperforming consumer discretionary and technology stocks over that period. The energy sector has a current price-to-earnings ratio of 15.3 compared with 19.7 for the S&P 500, which indicates good relative value in a sector that may be on a rebound. Our research desk put Trading Central’s research tools to work in order to find energy companies (which includes energy infrastructure names) benefiting from an oil price rebound off of historic lows.

The screen

We will be using Trading Central Strategy Builder to search for U.S.-listed stocks that are fairly valued against their peers in a rebounding energy sector.

We begin by setting a minimum market capitalization threshold of US$1-billion to focus on larger, more established energy companies.

Story continues below advertisement

Next, we screen for energy stocks that have a P/E ratio that is less than the S&P 500 in order to find undervalued energy companies relative to the broad U.S. market.

Finally, we want energy companies that have positive cash flow growth and an operating margin of 10 per cent or greater. Operating margin is a measure of how much profit the company makes on each dollar of core revenue. Higher operating margins are preferred.

We have also included dividend yield, year-to-date and one-year share price performance for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

Topping our list is TC Energy Corp., an energy infrastructure company with pipeline and power generation assets in Canada, the United States and Mexico. The company has the highest operating margin on our list at 45.3 per cent as well as the best (or least worst) year-to-date performance of minus 11.5 per cent. The stock has rebounded more than 45 per cent off its lows in March and continues to outperform the S&P 500.

Calgary-based Enbridge Inc. is an energy generation, distribution and transportation company. Its pipeline network consists of the Canadian mainline system, as well as regional oil sands and natural gas pipelines. The company has the highest market cap on our list at US$65.6-billion. In Thursday’s first-quarter earnings announcement, Enbridge announced spending cuts as a result of the decline in oil demand. Approximately $1-billion (Canadian) of capital spending will be delayed as physical distancing measures affect its construction schedules. Earnings for the quarter were largely positive, beating analyst estimates.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Story continues below advertisement

Select U.S.-listed energy stocks

RankCompanySymbolMkt. Cap. (US$ Bil.) P/EDiv. Yld. (%)CF Growth (Last Qtr. Vs. Prior Yr., %)Oper. Margin (TTM)YTD Perf. (%)1Y Perf. (%)Recent Price (US$)
1TC Energy Corp.TRP-N44.715.14.9104.645.3-11.50.747.00
2Frontline Ltd.FRO-N1.59.56.7161.224.7-42.2-6.17.56
3Euronav NVEURN-N2.218.56.071.519.4-23.22.19.89
4Cdn. Nat. ResourcesCNQ-N18.34.77.937.622.9-52.8-45.615.47
5Enbridge Inc.ENB-N65.616.47.96.117.3-23.1-16.732.45
6ONEOK Inc.OKE-N12.514.912.71,811.420.7-62.1-56.630.29
7Valvoline Inc.VVV-N31.913.62.863.615.5-23.3-10.016.97
8EOG Resources Inc.EOG-N28.29.73.330.423.9-45.3-51.248.42
9Cactus Inc.WHD-N1.29.52.4161.628.2-55.5-57.716.28

Source: Trading Central

Gary Christie is head of North American research at Trading Central in Ottawa.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies