Are These Low P/E Canadian Energy Stocks Worthy of Your Portfolio Right Now?

Canadian Natural Resources Ltd (TSX:CNQ)(NYSE:CNQ) and two other stocks are looking at less-than-cheerful times ahead, so are they buys?

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With falling oil prices and a whole host of other worries weighing on the global economic outlook, it’s no wonder that the near future is looking a little uncertain for oil and oil-weighted energy stocks. The following three key TSX index stocks are among the best picks for investors looking to capitalize on low market fundamentals and decent track records — especially if they’re bullish on oil for the mid to long term. But with a potential downturn in the industry on the way, are they a buy?

Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ)

Down 3.98%, Canadian Natural Resources had a great 12-month period, with a one-year past earnings growth of 46.6%, which trounces its negative five-year average of -5.6%. Is it one to buy and hold, though? A comparative debt level of 59.1% of net worth is over the significant threshold, meaning that the strictly risk-wary may want to look elsewhere.

In terms of valuation, a P/E of 11.4 and P/B of 1.3 feel as though they could end up going lower, so this may be a stock to watch for a deeper dip. Investors on the lookout for passive income with their energy stocks might like to know that Canadian Natural Resources has a trailing dividend yield of 3.83%. However, negative expected annual earnings of -1.7% over the next one to three years may combine with that debt and valuation to give a hold signal.

Suncor Energy (TSX:SU)(NYSE:SU)

Up 1.81% over the last five days, Suncor Energy is the strongest pick on the list, with some upward momentum, some good year-on-year growth, low debt, and a decent dividend. A one-year past earnings growth of 37.4% beats its five-year average earnings growth of 4.6%, while with a debt level of 36.4% of net worth, its balance sheet manages to keep its head above the water.

That dividend yield of 3.47% looks good, and with so defensive a stock as Suncor Energy, it’s represents stable passive income. If the valuation dips below a P/E ratio of 13.7 and somewhat overheated P/B of 1.5, this stock will be a stronger buy. Meanwhile, -5.1% expected earnings shows that Suncor Energy is in line with its industry.

Parex Resources (TSX:PXT)

Down 5.49% in the last five days at the time of writing, the valuation for bargain-basement TSX index ticker just keeps getting lower. With a share price knocked down by 46% off its future cash flow value, this high-profile energy stock makes the cut due to its low market variables — namely a P/E of 5.3. However, with a P/B ratio of 1.8, you’d be paying not far off double the per-asset value.

The bottom line

Canadian Natural Resources hasn’t hit the bottom yet, but when it does, it may well be a buy. Likewise, the next one- to three-year 4.3% drop in expected earnings signifies Parex Resources as one more to perhaps hold off on until it reaches a deeper low. In the meantime, Suncor Energy is a solid buy, with a valuation that’s about as good as it’s going to get and a decent yield to lock in; it’s also got some key defensive stats, making for a timely pick.

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 Victoria Hetherington has no position in any of the stocks mentioned.

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