Is This the Cheapest Value Stock in Energy?

Dear Reader,

I’ve got a new “stock crush.”

The company operates out of Houston, Texas, so this is going to be a long-distance relationship.

I look at the current state of the natural gas business, and I have to project a floor at $2.00. So, why not take advantage and look to own one of the deepest value stocks in the sector right now.

Let’s dig into an independent oil-and-gas name that operates out of the very-busy Marcellus Shale region of Pennsylvania.

Wow, This is Cheap

If you mistype the media outlet “ESPN” into Google – with the ticker “EPSN” – you’re lucky. It will bring you to a company called Epsilon Energy (EPSN).

The company focuses on developing and producing natural gas, which is a cleaner burning fossil fuel than oil or coal.

While everyone is trying to move away from carbon-based fuels, it’s important to note that natural gas is a critical bridge fuel.

And the United States is awash in natural gas.

Epsilon has taken a hit over the last year. But that all had to do with the dramatic speculation around natural gas prices following the war in Ukraine. EPSN shares have pulled back from one-year highs of $7.66 to nearly $5.00.

At some point, you have to look for confirmation that the stock is oversold… and it’s trading at a value.

The stock currently holds a Piotrotski score of 9 (which is perfect), and an Altman Z score of 5.5. The balance sheet looks strong, and its management is engaging in shareholder-friendly practices.

Its Graham number is a paltry 0.41, meaning that it’s trading well under its defensive price point of $11.00. It’s nearly trading at book value, with that ratio sitting at 1.12x (book share is $4.53, according to Finviz).

Its dividend is 5%. Its EV-EBIT is incredibly low – with a buyout multiple of 1.5x.

This is cheap. This is where you buy. This is where you hold. This is where you want to be VERY bullish on natural gas, where prices are very oversold – and there’s a nice dividend to tap into ahead of the summer.

There are very bullish tailwinds for natural gas, particularly the state of Europe, which is struggling to secure supply. This $2.25 level might have a downside to the $2.00 level, but this stock in EPSN is clearly at attractive price levels.

We’re fast approaching oversold levels based on the MFI and RSI levels. There’s a good reason to buy and hold EPSN and its near 5% dividend.

It will take some time, but natural gas prices will recover. And we want to target the names with the right fundamentals.

We want to own companies that have strong capital discipline, deep value metrics, and a contrarian perspective. Natural gas is low today.

The Energy Information Administration, the research arm of the Department of Energy, projects that natural gas prices will average $3.72 per million BTC in 2024.

That’s a nearly 65% jump from current prices. So, why wouldn’t you want to buy on the bottom and look for a rebound using EPSN.

Focus on the long-term and own stocks that have massive upside thanks to their current fundamentals. If you want to dive in right now, sign up for Tactical Wealth Investor today.

What’s on Tap Tomorrow

Finally, I really want you to join the team tomorrow for the weekly “Roundtable with Don Yocham.” Here’s what is on tap…

Tomorrow, the Commerce Department releases an update on CPI for April. So, how will the Fed and the market react to inflation over the next month? You’ll want to hear our panel’s take on the best way to protect your capital and profit from any big shift in stocks.
Scott Welsh sees a lot of FOMO from investors and traders wondering what stock to pick. Or, they get stuck in a lousy stock and don’t know what to do. He’s got some go-to ETFs to share with everyone.
Roger Scott will cover the impact of earnings revisions on stocks, what sectors he sees as vulnerable right now, and his hit list of stocks to short.
Jack Carter will discuss his all-weather approach to trading and why it serves him well. He’s got a few names that look primed for profits in the month ahead.

Tomorrow is live… it’s free… and most of all – it’s fun. These roundtables are an incredible opportunity to get direct insight from our top experts.

Set yourself a reminder to attend right here.

To your wealth,

Garrett Baldwin

*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.

Market Momentum is RED

Momentum remains red, and I’m watching the CPI number closely. With the S&P 500 ignoring the ongoing recession warnings from the bond market, now is the time to start playing defense with your portfolio. A debt ceiling resolution could create the ultimate “Sell the News” story for traders. Let’s be cautious.

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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.

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See you there!

Garrett

*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.

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