Dj Kosmos Energy Ltd. Stock Rises Thursday, Outperforms Market

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is Kosmos Energy (KOS). KOS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 7.44, which compares to its industry's average of 8.42. KOS's Forward P/E has been as high as 15.57 and as low as 5.13, with a median of 6.88, all within the past year.

KOS is also sporting a PEG ratio of 0.43. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. KOS's PEG compares to its industry's average PEG of 0.48. Over the last 12 months, KOS's PEG has been as high as 0.89 and as low as 0.35, with a median of 0.45.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. KOS has a P/S ratio of 1.01. This compares to its industry's average P/S of 1.05.

Finally, investors should note that KOS has a P/CF ratio of 2.66. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. KOS's current P/CF looks attractive when compared to its industry's average P/CF of 4.61. Over the past year, KOS's P/CF has been as high as 6.42 and as low as 2.52, with a median of 4.14.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Kosmos Energy is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KOS feels like a great value stock at the moment.

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Shares of CVR Energy, Inc. CVI experienced a gain of almost 4% since Icahn Enterprises (IEP), an investment firm controlled by billionaire investor Icahn, proposed to increase its stake in CVR Energy from its current 66% to around 81% on Nov. 8, 2024.

An Insight Into the Recent CVI Announcement

In its third-quarter earnings statement, reported on Nov. 8, IEP announced a 50% reduction in its dividend payout — from $1 per unit in Q2 to 50 cents in Q3 — to use the freed funds to increase its holding in CVI. The IEP plans to complete this procedure by purchasing up to 15 million additional shares for $17.50 per share, a 5.9% premium to Thursday’s close.

This decision came as a move to capitalize on the undervalued stock. IEP believes that the CVI stock has untapped potential despite recent challenges and that the shareholders could benefit from the premium cash-out.

CVI’s Struggles

Recently, CVI experienced instability and a significant decline in its stock price due to the suspension of its dividend payout for the third quarter. The move to suspend the dividend led to shareholders losing their confidence in the company and was viewed as a major setback by market analysts, but IEP considered it an investment opportunity, where it could increase its control over the company and decide its future strategies.

IEP’s Market Strategy Amid Legal Challenges

Recently, a short seller’s report challenged IEP’s valuation and dividend sustainability. Icahn, the holder of most of IEP’s shares, later dismissed the report as misleading, rebuilding shareholders' confidence in IEP’s financial standing.

Last year, Icahn Enterprises also faced some Securities and Exchange Commission charges over loan disclosure issues and, as a result, had to pay millions of dollars as a penalty. However, Icahn has continued to pursue bold investments in the market, including a major investment in Caesars Entertainment and a cooperation agreement with Southwest Gas.

CVI’s Zacks Rank and Key Picks

Headquartered in Sugar Land, TX, CVR Energy is an independent refiner and marketer of high-value transportation fuels. Currently, CVI has a Zacks Rank #5 (Strong Sell).

Investors interested in the energy sector might look at some better-ranked stocks like Archrock, Inc. AROC, Kosmos Energy Ltd. KOS and Flotek Industries, Inc. FTK.While Archrock currently sports a Zacks Rank #1 (Strong Buy), Kosmos Energy and Flotek Industries each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is a provider of natural gas contract compression services and a supplier of aftermarket services of compression equipment. The Zacks Consensus Estimate for AROC’s 2024 earnings indicates 59.42% year-over-year growth.

Hamilton-based Kosmos Energy Ltd. operates as an oil and gas exploration and production company focused on underexplored regions in Africa. KOS’ expected EPS (earnings per share) growth rate for the next 5 years is 17.50%, which aligns favorably with the similar industry growth rate.

Flotek Industries develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. The Zacks Consensus Estimate for FTK’s 2024 earnings indicates 125% year-over-year growth.

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Chevron CorporationCVX has extended the Shelf Drilling’s contracts for its Chaophraya and Krathong rigs, which have been operating offshore in Thailand for another two years. The combined contract valued at $197 million will ensure continued operations after the completion of its current contract in the second half of 2025. The contract extension will maintain CVX’s drilling activities in the Gulf of Thailand and mark a successful partnership between Chevron and Shelf Drilling in offshore exploration.

Custom-Built Rigs for CVX’s Factory-Style Operations

Shelf Drilling’s jack-up rigs were custom built to meet CVX’s factory-style drilling model in the Gulf of Thailand and also contained unique offline capabilities to align with the company’s requirements. The Chaophraya and Krathong rigs, delivered in 2016 and 2017, respectively, are LeTourneau Super 116 Enhanced Class models with high-spec drilling technology and can accommodate up to 160 people at a time.

Shelf Drilling’s Global Expansions and Strategic Moves

Shelf Drilling, along with its presence in Thailand, has a strong reach globally. The company has recently secured an Acknowledgement of Compliance for the Norwegian authorities and has been cleared to commence operations under a contract with Equinor. The company commenced new operations in West Africa and sold a rig for decommissioning projects in Malaysia. The company’s global presence signifies its geographic diversification and validates its contract extension with Chevron.

CVX’s Zacks Rank and Key Picks

The U.S. energy major Chevron is one of the world’s largest publicly traded oil and gas companies with operations that span almost every corner of the globe. However, the company is grappling with high sensitivity to oil price fluctuations and relatively expensive valuation. Currently, CVX has a Zacks Rank #4 (Sell).

Investors interested in the energy sector might look at some better-ranked stocks like Archrock, Inc. AROC, Kosmos Energy Ltd. KOS and Flotek Industries, Inc. FTK.While Archrock currently sports a Zacks Rank #1 (Strong Buy), Kosmos Energy and Flotek Industries each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is a provider of natural gas contract compression services and a supplier of aftermarket services of compression equipment. The Zacks Consensus Estimate for AROC’s 2024 earnings indicates 59.42% year-over-year growth.

Hamilton-based Kosmos Energy Ltd. operates as an oil and gas exploration and production company focused on underexplored regions in Africa. KOS’ expected EPS (earnings per share) growth rate for the next 5 years is 17.50%, which aligns favorably with the similar industry growth rate.

Flotek Industries develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. The Zacks Consensus Estimate for FTK’s 2024 earnings indicates 123.28% year-over-year growth.

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