Is Suncor Energy (TSX:SU) A Worthy Discounted Bet?

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Summary

  • Less than a week ahead of Canada’s 2021 federal budget reveal, equity markets are displaying significant resilience.
  • While the S&P/TSX Composite Index currently holds a year-to-date (YTD) growth of over 10 per cent, the S&P/TSX Capped Energy index is up by over 26 per cent this year.
  • Having recorded a 10-day trading volume of nearly six million, Suncor Energy stocks post a YTD growth of nearly 23 per cent.

Less than a week ahead of Canada’s 2021 federal budget reveal, equity markets are displaying significant resilience. While the S&P/TSX Composite Index currently holds a year-to-date (YTD) growth of over 10 per cent, the S&P/TSX Capped Energy index is up by over 26 per cent this year. On that note, let us look at the profile of a trending Canadian energy stock that is available at a discount and may boost your investments in the future – Suncor Energy Inc (TSX:SU).

 

Suncor Energy Inc (TSX:SU) – Stock Performance


Having recorded a 10-day trading volume of nearly six million, Suncor Energy stocks post a YTD growth of nearly 23 per cent. In the last one year, the Canadian energy stock surged by almost 26 per cent.

While oil prices have crossed their pre-COVID levels, Suncor scrip continues to trade at a discount, down by over 11 per cent from it 52-week high of C$ 23.69 (March 15, 2021).

1-year chart of Suncor Energy’s stock performance (Source: Refinitiv/Thomson Reuters)

 

The stock also posts a price-to-book (P/B) ratio of 1.099 and a price-to-cashflow (P/CF) ratio of 14.9, as per TMX data.

After slashing its dividend payout amid the coronavirus pandemic around May last year, Suncor is currently distributing a quarterly dividend of C$ 0.21. According to TMX, it holds a dividend yield of 3.255 per cent.

 

Suncor Energy’s Latest Financials


The Calgary-based firm reported a net loss of C$ 168 million in the fourth quarter ending 31 December 2020, which was relatively lower the net loss of C$ 2.335 billion in Q4 2019. The Q4 2020 net loss, Suncor pointed, was driven by multiple factors, including an after-tax transportation provision of C$ 142 million in relation to the cancelled Keystone XL pipeline project.

The oil and gas producer also saw an operating loss of C$ 142 million in the latest quarter, as against the operating earnings of C$ 782 million in Q4 2019. This was primarily due to the crude oil and refined product realizations remaining “significantly” below its Q4 2019 levels amid the COVID-19 pandemic.

Suncor pointed in its latest financials that its Q4 2020 operating losses were “minimized” due to its continued cost reduction initiatives.

Suncor Energy’s operations and financial stability took quite a beating from the COVID outbreak last year. But as the economy slowly heals and the vaccine campaign progresses, the integrated energy company is expected to make a turn for the better on the back of higher oil prices.

©Kalkine Group 2021

 

In case of increased productions and controlled operating expenses, Suncor’s stocks could be impacted in the long run.

 

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.

 

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