December 17th, 2021 | 10:18 CET
Nordex, Saturn Oil + Gas, Varta: In search of energy multipliers
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"[...] The Oxbow Asset now delivers a substantial free cash flow stream to internally fund our impactful drilling and workover programs. [...]" John Jeffrey, CEO, Saturn Oil + Gas Inc.
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Nordex: The mills grind slowly in Germany
Rostock-based wind turbine manufacturer Nordex is one of Germany's most popular stocks. Why? Like few others, the stock embodies the change we are all facing. If the BASF plant in Ludwigshafen is soon to run on renewable energy, something urgently needs to happen. Wind turbines from Nordex could play an important role. Nordex is well positioned with its technology and has long been active worldwide as a provider of appropriate wind power solutions. But those who want to act quickly often face headwinds, especially in Germany. So it is not at all certain that Nordex will benefit so quickly from the energy turnaround in Germany. The mills grind slowly in administration, as is well known.
But fortunately, Nordex's business is also humming abroad. In South America, in particular, things have been humming recently: The Company reported new orders in Brazil and Peru. While growth is intact, there is a problem with the margin. Nordex will only have a margin of 1% in 2021. Other companies in the sector earn more, as a recently published research article by researchanalyst.com shows. The stock is not uninteresting, but Nordex urgently needs to expand its margin. Rising commodity prices and sputtering supply chains could be impediments in that regard.
Saturn Oil & Gas: This combination of growth and substance is rare
Canadian oil producer Saturn Oil & Gas currently has no problem with margins. With sales of CAD 48.5 million, EBITDA of CAD 17.2 million remained in the third quarter. As a result, the Company is one of the more profitable stocks in its peer group. However, the valuation is one of the lowest in the peer group comparison, as the Company presents in its current corporate presentation. This discrepancy could be the transformation that Saturn Oil & Gas underwent in the first half of the year. The Company acquired an oil field with a daily production of 6,400 barrels/day and increased its production by 2,000%. Thanks to a newly acquired partner, the financing was largely secured by means of a credit line. Since Saturn immediately secured the new production, this credit line will be redeemed within three years - Saturn has largely eliminated risks associated with fluctuating oil prices. However, this has not yet been received by the market everywhere.
Because the new oil field also offers growth potential in reworking existing wells and brings capital into the coffers month after month that can also be invested in growth on other projects, Saturn Oil & Gas offers a promising combination of low valuation and growth opportunities. While many major oil companies are now building wind farms, the Canadian oil and gas sector is operating close to full capacity. Saturn Oil & Gas shares fell after the release of quarterly results and also declined in the wake of the Omicron shock. However, the stock had been steadily moving upward in the months prior. Given the Company's prospects, Saturn should soon be back in safe waters.
Varta: Why the air is out
At first glance, the Varta share also currently offers little potential for setbacks - from a chart perspective, it seems unlikely that this share will quickly return to double-digit growth. However, the chart-technical interpretation of the situation should never be made without a fundamental assessment. Here, in particular, there is currently a bit of a lack of imagination. The start in the area of batteries for e-cars has long been priced in at Varta. On a three-year view, a return of 292% is on the books. However, hardly anything has happened in the last year: a minus of 2.6% is more reminiscent of a dull standard stock than a promising growth stock. The share is currently not a compelling investment, even if the risk seems limited.
Anyone looking for investments in renewable energy and battery technology should consider the overall context. Many stocks that spontaneously come to investors' minds are already ambitiously valued or, like Nordex, have another catch, such as low margins. Saturn Oil & Gas is benefiting indirectly from the energy transition. In addition, the Canadians have long been committed to ESG. Given the current valuation and growth prospects, the share is worth a closer look after the recent price slide.
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