Enerplus Corp (ERF.TO) Buy, Sell or Hold

Enerplus Corp (ERF.TO)

26.78

-0.93 (3.36%)

as of Jun 3, 2024, 8:00:00 pm Market Open.

235 watching

TOP PICK

Chose it on valuation of 11x earnings and price momentum. Big ROE. Reducing debt and returning cash to shareholders by buying back shares. Room to acquire. Yield is 1.03%, very low payout ratio. (Analysts’ price target is $21.89)

TOP PICK

Has biggest opportunity in Canadian energy right now (largest misprice). Currently trading at ~2x cash flow and has 30% free cash flow yield ($100 oil). Can privatize in ~2 years with 10 years of inventory. 8 years of free cash flow for free. Excellent management decisions. Expecting share buy backs & $36 share price.

PAST TOP PICK

(A Top Pick Feb 09/21, Up 171%) Believes large amount of company upside left. At $80 oil company could privatize in 4 years. At $100 oil, company could privatize in ~2 years. Company share price = $32/share at $80 oil, $42/share at $100 oil.

TOP PICK

A potential double from here. Trading at 2.6x cash flow. Free cashflow is 23%. Buying back shares due to distressed value. Has 10 years of inventory. Balance sheet is good. Could privatize themselves in 4 years. 99% upside potential. (Analysts’ price target is $16.24)

STRONG BUY

PMO recognizes that the energy sector is key to get out of the fiscal hole from the pandemic. Probably going to get carbon capture and subsidy schemes. It is up now. The messaging was misinterpreted. The company plans to buy 7% of their stock. 33% free cashflow yield at $80. Trading at 2.5x which is very misspriced.

TOP PICK

Trading at 2.2x enterprise value to cashflow, which is cheaper than earlier this year. Q1 of next year should see a material share buyback. Trading at a 30% free cashflow yield. The low valuation will be rerated. Could trade at a 5x multiple, which would be a 153% upside. (Analysts’ price target is $12.19)

BUY

Probably will double still. Stock is still cheap. Where is the best upside is the question. The upside will come from the management's signal for return of capital. Trades at 2.6x EV to cashflow. Trading at 25% free cashflow yield with 10 year drilling inventory. If production is kept flat, they could privatize and take themselves private many times over before going through their inventory. Could be an $18 stock.

BUY

A court ruled that the pipeline can flow until March next year. This pipeline has never had an issue. Optimistic that it will not be shutdown. Bought two assets and increased drilling inventory to 10 years. At $70 oil, it is trading at 3x enterprise value to cashflow, and 31% free cashflow yield. (Analysts’ price target is $15.50)

BUY

Really undervalued right now. Free cashflow is $1.8B and their market cap is $1.9B. Speaks to how undervalued it is. There is uncertainty in Dapple with environmentalists taking them to court. The results should be in favour of ERF. Even if it is against them, it is not material. Balance sheet, inventory depth is good. At $60 oil, $12.28 target.

BUY

It has performed relatively well. One overhang is the uncertainty of the pipeline that moves oil from their key location in the Balkans. If the pipeline is cancelled, there is enough rail capacity to move barrels. It would impact their cashflow by $40M in incremental transportation cost. $2/barrel. They made an acquisition finally. 2.8x enterprise to cashflow at $60 oil. 5x multiple would be a reasonable place for this to trade. 100% upside.

TOP PICK

They did an accretive (inventory) acquisition in their Bakken play. They have a 34% free cash flow yield. He has a 5x mulitiple on it and targets almost $11. (Analysts’ price target is $6.53)

BUY

This gives you a large operational leverage to oil prices rising. Their primary asset is burdened with high royalty rates. After $50 oil, every dollar is very significant for free cashflow. At $50 oil, they would trade at 3.3 times and at $60 at 2.4 times. Historically, they traded at 8 times. However, the market has changed. At $60, they could generate 25% free cashflow. The name has underperformed due to natural gas prices falling and court issues for the Dakota Access Pipeline. However there is rail capacity to compensate. One of his largest holding at around 7% weight and he continues to buy.

BUY

Sold the stock a couple months ago and then bought back a 5% weight this morning. The stock has probably bottomed. The market wanted them to transact and when they did not execute, the multiple collapsed. At $50 oil, it will trade at 2.3x cashflow. The stock price could triple going forward.

DON'T BUY

Part of bombed out group of stocks. So extraordinarily cheap. Will survive. Nice dividend and it's safe-ish for now. No growth in this environment. Do you really want to buy a name that's not growing? He's staying away, too risky.

PAST TOP PICK

(A Top Pick Oct 01/19, Down 69%) It was a sneaky way to get US exposure. However, Canada is the place to be for energy investors now. Takeaway capacity has been improving and outlook for differentials are positive. This may be a value trap.

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Enerplus Corp (ERF.TO)