Oil prices have retreated from their highs, but have the potential to spike in the near term, driven by macro factors. Oil & gas stock Unit Corporation (UNTC) has gained more than 85% this year. And given its strong fundamentals, it might be worth your attention. Continue reading….
Unitary company (UNTC) explores, acquires and develops oil and gas properties. The Company operates through its three major segments: Oil & Natural Gas; Contract drilling; and half way.
In June, the UNTC announced that it had terminated its agreement with Tudor, Pickering, Holt & Co. (TPH) to advise on the previously announced process to sell all of its oil and gas properties and reserves. The company also announced an increase from $50 million to $100 million in the total value of common stock it could repurchase. as part of its share buyback program.
Oil prices have fallen sharply from their highs, but there could be still be an argument to buy oil stocks. According to Bill Smead, chief investment officer at Smead Capital Management, oil prices could rise again due to factors such as the United States having to replace 180 million barrels of strategic reserves and China’s post-Covid recovery.
Over the past year, UNTC stock has gained 181.7%. It has gained 87.3% since the start of the year and 14.6% over the past month. The stock gained 0.8% intraday to close its last trading session at $60.50.
Here are the factors that could affect the performance of the UNTC in the short term:
For the fiscal second quarter ended June 30, UNTC’s total revenue increased slightly year-over-year to $134.55 million. Operating income increased 79.8% from the prior year quarter to $70.16 million. Net income attributable to UNTC and net income attributable to UNTC per common share were $80.09 million and $7.82, up substantially from their negative values a year ago .
In terms of trailing 12-month P/E, UNTC is trading at 5.93x, 42.6% below the industry average of 10.32x. The stock’s trailing 12-month PEG multiple of 0.01 is 87.4% below the industry average of 0.06. In terms of its trailing 12-month EV/EBITDA, it trades at 2.50x, 70% below the industry average of 8.35x.
Wide profit margins
The net profit margin for the last 12 months of the UNTC and Leveraged FCF the margins of 15.40% and 13.61% are 61.4% and 136.7% higher than their respective sector averages of 9.54% and 5.75%. The stock’s 12-month ROE, ROTC and ROA of 52.31%, 25.56% and 25.76% are 237%, 297.4% and 360.8% higher than their respective industry averages of 15.53%, 6.43% and 5.59%.
POWR ratings reflect promising outlook
The strong fundamentals of the UNTC are reflected in its POWR Rankings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
UNTC has a Momentum rating of A, in sync with the stock trading higher than its 50-day moving average of $54.60 and its 200-day moving average of $50.25. The stock also has an A rating for value and quality, which matches its low valuations and wide profit margins.
In stock 97 Energy – Oil & Gas the industry, it is ranked #5. The industry is rated B.
Click here to see additional POWR ratings for the UNTC (Growth, Stability and Sentiment).
See all the top Energy – Oil & Gas stocks here.
Although oil prices have retreated, they could rise again, which could benefit the UNTC. The stock has risen significantly this year, buoyed by industry tailwinds. And, given its strong fundamentals, I think the stock could be worth buying now.
How does Unit Corporation (UNTC) compare to its peers?
Although UNTC has an overall POWR rating of A, one might consider looking at its industry peers, Whitecap Resources Inc. (SPGYF) and Valero Energy Corporation (VLO), which also have an overall rating of A (Strong Buy).
UNTC shares were unchanged in premarket trading on Monday. Year-to-date, the UNTC has gained 87.31%, compared to a -10.46% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.