Devon Shares Rise 12.8% in a Month: Good Time to Buy the Stock?

Core Viewpoint - Devon Energy Corporation's shares have shown a positive performance recently, gaining 12.8% in a month, outperforming the industry and sector averages, but the stock has declined 11% over the past year, indicating a gradual recovery path [1][3]. Performance Analysis - Devon's stock has outperformed the Zacks Oil & Gas- Exploration and Production- United States industry's return of 9.7% and the broader Zacks Oil and Energy sector's decline of 6.5% in the last month [1]. - Over the past year, Devon's stock has declined by 11%, while EQT Corporation, a peer in the industry, saw a more significant decline of 34.8% [3]. Technical Indicators - Devon's stock is currently trading above its 50-day simple moving average (SMA), indicating a bullish trend [6]. - The 50-day SMA serves as a key indicator for traders and analysts to identify support and resistance levels [9]. Operational Strengths - Devon's multi-basin portfolio and focus on high-quality assets are enhancing its production capabilities [10]. - The recent acquisition of Grayson Mill Energy is expected to triple total production volume to 150,000 barrels of oil equivalent per day from the previously expected 50,000 Boe/d [11]. - Devon's assets are capable of sustaining production levels for over 10 years, supported by ongoing exploration activities [12]. Cost Management - Devon's low-cost operations have improved its margins, with production costs averaging $11.39 per Boe in Q3 2024, a 7% decline from the prior period [13][14]. Financial Performance - Devon has consistently exceeded earnings estimates, with an average positive earnings surprise of 4.99% over the last four quarters [15]. - The company's return on invested capital (ROIC) stands at 8.16%, outperforming the industry average of 6.4%, indicating efficient investment [16]. Valuation Metrics - Devon's shares are trading at a relative discount, with a trailing 12-month EV/EBITDA of 4.41X compared to the industry average of 7.31X [19]. Earnings Outlook - The Zacks Consensus Estimate for Devon's earnings per share for 2024 and 2025 has decreased by 2.07% and 5.62%, respectively, over the past 60 days [21]. Summary - Devon Energy has a balanced exposure to oil, natural gas, and NGL production, with a low-cost production structure that enhances margins. The multi-basin assets contribute to free cash flow and strengthen the balance sheet. Despite its strong ROIC and relative discount, the declining earnings estimates suggest that investors may want to wait for a better entry point [22].