Courbevoie, France-based energy company TotalEnergies SE (TTE) operates through four segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services. It has a $130.13 billion market capitalization.

Last month, it was reported that TTE had signed a new investment deal in Qatar’s natural gas production expansion. The company is expected to have a 9.3% stake in the North Field South gas project, becoming the first foreign partner in that section.

Moreover, earlier this month, TTE announced that it would start offering biofuels as a bunkering fuel to its customers in Singapore from next year. The company is seeking to reduce its emissions from shipping operations through this venture.

However, the stock has declined 1.3% year-to-date and 3.7% over the past month to close its last trading session at $48.80.

Here are the factors that could affect TTE’s performance in the near term:

Solid Financials

For the fiscal second quarter of 2022, TTE’s adjusted EBITDA increased 116.2% year-over-year to $18.74 billion. Adjusted net income and adjusted EPS rose 182.9% and 195.3% from the prior-year quarter to $9.80 billion and $3.75. Cash flow from operations improved 115.7% from the same period the prior year to $16.28 billion.

Cheap Valuations

In terms of its forward non-GAAP P/E, TTE is trading at 3.45x, 54.3% lower than the industry average of 7.55x. The stock’s forward EV/Sales multiple of 0.56 is 69.6% lower than the industry average of 1.85. In terms of its forward EV/EBIT, it is trading at 2.74x, 67.5% lower than the industry average of 8.40x.

Broad Profit Margins

TTE’s trailing-12-month EBIT margin and levered FCF margin of 17.54% and 6.87% are 20.7% and 23.7% higher than their respective industry averages of 14.54% and 5.55%.

Its trailing-12-month ROE, ROTC, and ROA of 18.79%, 14.40%, and 6.33% are 23.3%, 113.1%, and 13.3% higher than their respective industry averages of 15.24%, 6.76%, and 5.59%.

Favorable Analyst Expectations

The consensus EPS estimates of $4.06 and $3.62 for the quarter that ended September and the quarter ending December indicate 130.7% and 42% year-over-year increases. The consensus revenue estimate for the same periods of $77.52 billion and $68.49 billion reflects improvements of 65.5% and 13.5% from the respective prior-year period.

Street EPS and revenue estimates for the fiscal year 2022 of $14.31 and $263.81 billion indicate 114.2% and 28.1% year-over-year rises.

POWR Ratings Reflect Promising Prospects

TTE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

TTE has a Sentiment grade of B, in sync with its favorable analyst expectations.

The stock has a C grade for Stability, consistent with its five-year monthly beta of 0.96.

In the 94-stock Energy – Oil & Gas industry, it is ranked #13. The industry is rated B.

Click here to see the additional POWR Ratings for TTE (Growth, Value, Momentum, and Quality).

View all the top stocks in the Energy – Oil & Gas industry here.

Bottom Line

TTE’s Qatar deal might benefit the company as Europe scrambles to replace Russian energy supplies. Moreover, the company possesses solid financials and is trading at a discounted valuation. With analysts expecting boisterous growth in its bottom line in the current year, the stock might be an ideal buy now.

How Does TotalEnergies SE (TTE) Stack Up Against its Peers?

While TTE has an overall POWR Rating of B, one might consider looking at its industry peers, Whitecap Resources Inc. (SPGYF) and Epsilon Energy Ltd. (EPSN), which have an overall A (Strong Buy) rating.

TTE shares were trading at $48.27 per share on Wednesday morning, down $0.53 (-1.09%). Year-to-date, TTE has gained 0.53%, versus a -23.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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