BY MARK SEBASTIAN
October 13, 2023
Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Traders,
The energy complex is not having a great year. On the year, the XLE etf is up 4 dollars, good for about 5%.
The major players XOM and CVX are barely up.
Some of the names though have been getting hammered.
This weeks stock has a really ugly chart:
Year over year the stock is down over 20 dollars, high to low, north of 30.
Do you know what stock this is yet?
This week we are looking at Devon Energy.
DVN digs up oil, nat gas and other carbon liquids. It has not been a good year for the stock.
The stock is taking pain primarily from its nat gas unit…nat gas has not had a great year.
But natural gas appears to be finding a bid…is it time to buy?
Lets break it down.
From a numbers there are definitely things to like about Devon Energy.
The company has a really low PE at 6.39, they are making a lot of money given how much the shares cost.
They have a ton of revenue at 17.1 billion about 57% of the value of the company right now.
The EPS is massive at 7.32 per share, the company pays a great dividend of 3.30 a share…good for a yield of just over 7%.
It has great cash flow of 11.23 per share.
There is a lot to like here.
WIth oil potentially set to rally there is a lot to like
So why is the stock taking it on the chin in 2023?
The Bad
It starts with the nat gas portfolio. You saw the chart above, it has been a really rough year for natural gas and that is a big part of DVN’s business.
Then there is the cash on hand, at only .74 per share, that is a lot lower than I would like given the huge dividend the company pays.
On a positive note the debt to equity ratio is pretty dar good although it popped in 2020 and has stayed above trend.
Mostly though, that is NOT related to an increase in debt but related to the stock dropping.
The verdict.
The stock is probably a buy, I would sell puts in this until the cows come home and will take a hard look at calls on Monday.
Questions about that? Leave a comment below!
Mark Sebastian
Founder & CEO, Option Pit
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