Unit Corporation (UNTC) explores, acquires, and develops oil and natural gas properties. The company operates through its three broad segments: Oil and Natural Gas; Contract Drilling; and Mid-Stream.
In June, UNTC announced that it had ended its agreement with Tudor, Pickering, Holt & Co. (TPH) as an advisor for the previously announced process to sell up to all of its oil and gas properties and reserves. The company also announced an increase from $50 million to $100 million in the aggregate value of shares of common stock that it might repurchase under its stock repurchase program.
Oil prices have retreated sharply from their highs, but there might still be a case for buying oil stocks. According to Bill Smead, chief investment officer at Smead Capital Management, oil prices might rise once again on factors such as the United States having to replace 180 million barrels of strategic reserves and China’s recovery from Covid.
Over the past year, UNTC’s stock has gained 181.7%. It has gained 87.3% year-to-date and 14.6% over the past month. The stock has gained 0.8% intraday to close its last trading session at $60.50.
Here are the factors that could affect UNTC’s performance in the near term:
For the fiscal second quarter ended June 30, UNTC’s total revenues increased marginally year-over-year to $134.55 million. Income from operations rose 79.8% from the prior-year quarter to $70.16 million. Net income attributable to UNTC and net income attributable to UNTC per common share came in at $80.09 million and $7.82, up substantially from their negative year-ago values.
In terms of its trailing-12-month P/E, UNTC is trading at 5.93x, 42.6% lower than the industry average of 10.32x. The stock’s trailing-12-month PEG multiple of 0.01 is 87.4% lower than the industry average of 0.06. In terms of its trailing-12-month EV/EBITDA, it is trading at 2.50x, 70% lower than the industry average of 8.35x.
Wide Profit Margins
UNTC’s trailing-12-month net income margin and levered FCF margin of 15.40% and 13.61% are 61.4% and 136.7% higher than their respective industry averages of 9.54% and 5.75%. The stock’s trailing-12-month ROE, ROTC, and ROA of 52.31%, 25.56%, and 25.76% are 237%, 297.4%, and 360.8% higher than their respective industry averages of 15.53%, 6.43%, and 5.59%.
POWR Ratings Reflect Promising Prospects
UNTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
UNTC has a Momentum grade of A, in sync as the stock is trading higher than its 50-Day Moving Average of $54.60 and its 200-Day Moving Average of $50.25. The stock also has an A grade for Value and Quality, consistent with its low valuations and broad profitability margins.
In the 97-stock Energy – Oil & Gas industry, it is ranked #5. The industry is rated B.
Click here to see the additional POWR Ratings for UNTC (Growth, Stability, and Sentiment).
View all the top stocks in the Energy – Oil & Gas industry here.
Although oil prices retreated, they could rise once again, which might benefit UNTC. The stock has gained significantly this year, supported by the industry tailwinds. And, given its solid fundamentals, I think the stock might be worth buying now.
How Does Unit Corporation (UNTC) Stack Up Against its Peers?
While UNTC has an overall POWR Rating of A, one might consider looking at its industry peers, Whitecap Resources Inc. (SPGYF) and Valero Energy Corporation (VLO), which also have an overall A (Strong Buy) rating.
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UNTC shares were unchanged in premarket trading Monday. Year-to-date, UNTC has gained 87.31%, versus a -10.46% 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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