Spoiler alert, if you haven’t been to the gas station in the past week, you may be in for a shock. The price of gas has risen about 28% since early July, spiking higher the past few weeks. 

While I’m not personally pleased by this, it does open up more investing opportunities in stocks like Battalion Oil (BATL - Get Rating). This under $10 stock is set to outperform with West Texas Intermediate (WTI) right at $90 a barrel. 

Battalion should not only benefit from rising oil prices, but the company has been on a focused mission this year to reduce cost. Earlier this year, BATL CEO Matt Steele said the company had reduced its corporate office workforce by 44%. Steele expects a combination of staff reductions and other cost saving measures to reduce total general and administrative costs by 40% in 2023.

The company currently trades at an astoundingly low 0.9x earnings, and 3.7x projected earnings. BATL currently trades at .45x its price to sales, and has a low price to book ratio of less than 2x.

BATL has been spending recently on several “acid gas injection” projects, which are coming online now. Those facilities are expected to save the company an additional $2.5 million per month in costs associated with outside processing facilities. 

With operating margins recently coming in at 42%, and a return on equity (ROE) of 25%, rising oil prices should only bolster these outstanding numbers. 

Out POWR Ratings have BATL ranked above 90% of companies in our database on the component of Value.  

From my view there is no relief on the horizon for gas prices. In fact, if anything there are catalysts out there, such as the refilling of the strategic oil reserves that must take place sooner rather than later, that point to at minimum a stable price and more likely a higher oil price. 

These factors should continue to support BATL, which has fallen from its highs of around $20 in 2022 to its current price just under $6.

What To Do Next?

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BATL shares closed at $5.92 on Friday, up $0.03 (+0.51%). Year-to-date, BATL has declined -39.03%, versus a 13.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Jay Soloff

Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services. More...

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