Devon Energy Corp (DVN)

susaninj (96.35) Submitted: 2/07/07 4:44 AM : Start Price: $68.62 DVN Score: 35.80

Natural Gas price increasing steadily and as per longer term trend by Morningstar analysis in the range of 6-7$ per mcf, and long term benchmark oil prices around $50, this stock has only growth on the upside. Naturally, if the oil/gas price increases, the fair value will increase too. Though the dividend is scanty, the growth potential from all the acquisition is really attractive even for a value investor. While the P/E ratio for industry is approx 12, DVN has a p/e about 9.7 and Price/Book at 1.8, which for industry is 3.1. All shows that this stock is currently undervalued.
The risk side is oil and natural gas as commodity, which IMHO is not going to go down very much from where it is now. Another risk is the deep water exploration challenge for Devon, which should be a manageable risk with the improving exploration technologies in future. Even if those exploration are delayed, the profit potential is delayed, not eliminated.

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