Double Your Money With 1 of These Stocks

Aim for strong price appreciation with Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) and another stock.

| More on:

Here are two stocks that can deliver ridiculous returns. Let’s take a look at each high-return opportunity to see what’s going on.

ZCL Composites (TSX:ZCL) stock has fallen by more than half from its 2017 high. The company makes and ships environmentally-friendly tanks to store fuel, water, oil, or gas in North America.

Its revenues and earnings have fallen for about two consecutive years. In the first half of the year, ZCL’s revenue declined by about 7.5%, and its adjusted EBITDA fell about 39%.

The drop in profitability really stretches ZCL’s payout ratio, which has investors worried about a potential dividend cut. Its shareholders should not expect a special dividend next year unless the business starts turning around.

The former CEO just retired early this year. Since the new CEO just came on board in early September, investors should give time for the new guy on the job to turn the company around.

We aren’t going to see a turnaround of the stock until the company’s business picks up or has a positive outlook. Having revenue growth would be a good start.

Notably, ZCL has a very clean balance sheet with no long-term debt as of the end of the last reported quarter. Its trailing-12-month net margin was 8.7%.

So, on greater demand for its products, ZCL should trade significantly higher — potentially at the $12-per-share area again, which would represent almost 80% upside from $6.67 per share as of writing.

The analyst consensus from Thomson Reuters has a 12-month target of $11.50 per share on the stock, which represents nearly upside potential of about 72%.

A stock price graph showing growth over time
Image source: Getty Images.

Baytex Energy (TSX:BTE)(NYSE:BTE) is presently a speculative investment. However, it can quickly turn into a value investment. In the last four reported quarters, Baytex generated about $327.7 million of operating cash flow. Because of capital expenditures of about $328.3 million, it was free cash flow negative.

After the merger with Raging River, Baytex estimates 2019 production of 100,000 – 105,000 barrels of oil equivalent per day and adjusted funds flow of $900 million with about 64% as sustaining capital, 25% as growth capital, and 11% as debt repayment.

Assuming a WTI oil price of US$65 per barrel, Baytex expects to generate strong free cash flow that can be used to more quickly deleverage its balance sheet, grow the company, or to even reinstate its dividend.

The analyst consensus from Reuters has a 12-month target of $6.19 per share on the stock, which represents almost a double from $3.11 per share as of writing.

Investor takeaway

Because ZCL and Baytex have above-average risks, they could very well have more downside in the near term. So, interested investors should look for some support for the stocks before jumping in.

When things get better, the stocks can climb significantly higher. Investors who can stomach the risk can consider reasonable allocations in these types of stocks to aim for an outsized gain averaged across their positions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares in Baytex.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »