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7 Undervalued Oil and Gas Stocks Ripe for Gains

Written by: Frank Byrt 07/02/12 - 11:08 AM EDT
Tickers in this article: SU DVN UPL KMP PXD APA EPD

Investor takeaway: Its shares are down 7.7% this year and 20% over the past three months. Analysts give its shares 12 "buy" ratings, nine "buy/holds," and eight "holds," according to a survey of analysts by S&P. S&P rates its shares "buy," with a 44% premium on the current price to S&P's 12-month target price.

Morningstar gives it its highest rating of five stars and its analyst Mark Hanson says that, "since late 2009, Devon has closed on almost $10 billion in asset sales as part of its shift toward U.S. and Canadian onshore resource plays. The result is a broad portfolio of growth-oriented oil and gas assets and a rock-solid balance sheet to aggressively develop these resources over the next several years."

The company has a forward P/E of 7.8.

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3. Enterprise Products Partners(EPD)

Company profile: Enterprise, a partnership with a market value of $43 billion, is an integrated provider of natural gas and natural gas liquids services, including processing, transportation and storage.

Dividend Yield: 5.20%

Investor takeaway: Its shares are up 11% this year and have a three-year, average annual return of 31%. Analysts give its shares 13 "buy" ratings, eight "buy/holds," and one "hold," according to a survey of analysts by S&P. S&P has it rated "strong buy" with a $59 price target, which is a 23% premium to the current price.

The ratings firm says it "is well-positioned to benefit from its strategically located assets, diverse cash flows, and solid balance sheet. It has a strong asset base, in our view, with access to high-demand markets and major supply sources" and adds that "we expect rising pipeline volumes to boost earnings and cash flow over the next several years."

Enterprise Products Partners has a forward P/E of 18.4.

2. Pioneer Natural Resources(PXD)

Company profile: Pioneer, with a market value of $10 billion, explores for and produces oil and natural gas in the U.S.

Dividend Yield: 0.10%

Investor takeaway: Its shares are down 7 % this year, including 21% this year. Analysts give its shares 16 "buy" ratings, six "buy/holds," and eight "holds," according to a survey of analysts by S&P. S&P has it rated "strong buy" with a $135 price target, a 63% premium to its current price.