Best Stock to Buy Right Now: Baytex vs Suncor?

Suncor and Baytex stocks both look like solid companies offering growth and dividends. But which is the better buy?

| More on:
construction workers talk on the job site

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Energy stocks are having a bit of a moment lately. Yet there are some doing even better than others. When it comes to choosing between Baytex Energy (TSX:BTE) and Suncor Energy (TSX:SU) on the TSX, investors have two distinct options in the energy sector. But which might be the better buy? Let’s delve into both of these stocks. Here, we’ll consider recent performances, financial health, and market positions to determine which might be the better buy right now.

Created with Highcharts 11.4.3Baytex Energy + Suncor Energy PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Some background

Baytex Energy, headquartered in Calgary, Alberta, focuses on crude oil and natural gas production, primarily in the Western Canadian Sedimentary Basin and the Eagle Ford formation in the United States. Suncor Energy, also based in Calgary, operates as an integrated oil and gas company, with activities spanning oil sands development, refining, and retail operations through its Petro-Canada brand.

In the first half of 2024, Baytex reported a significant rebound, with production surging approximately 73% to an average of 152,407 barrels of oil equivalent per day (boe/d). This led to an 87% increase in adjusted funds flow, reaching $956.7 million. Meanwhile, Suncor’s second-quarter results showed a 12% rise in adjusted operating earnings to $3.4 billion, with adjusted funds from operations up 16% to $6.6 billion.

As to stock performance, Baytex’s stock price stood at $4.09 at writing, reflecting a 5.1% year-to-date return. Suncor’s stock was priced at $52.46, with a year-to-date return of 15.7%. All this is well and good, but are these stocks still a valuable buy?

Valuation

First, let’s consider what investors can grab right away – a dividend. Baytex offers a quarterly dividend with an annualized payout of $0.09 per share, yielding about 2.1%. Suncor provides a more substantial dividend, with an annual payout of $2.18 per share, yielding approximately 4.2%.

Then there’s the financial health of both companies to make sure dividends and growth can continue. Baytex’s total debt stands at $2.3 billion, with a debt-to-equity ratio of 57.4%. Suncor has a total debt of $15.6 billion and a debt-to-equity ratio of 35%.

Meanwhile, Suncor’s integrated operations, including refining and retail, provide a buffer against oil price volatility. Baytex, being more focused on exploration and production, is more susceptible to fluctuations in commodity prices. However, analysts currently rate Baytex as undervalued, estimating a potential upside of about 47% from its current price. Suncor is estimated to have a 12-month upside potential of around 15%.

Bottom line

So with all this taken into consideration, which is the better buy for investors, Suncor or Baytex? If you’re seeking higher potential returns and are comfortable with increased risk, Baytex might be appealing due to its growth prospects and current undervaluation. However, if stability and consistent dividends are your priorities, Suncor’s diversified operations and stronger financial health make it a more prudent choice.

In either case, you’ll receive a solid dividend yield that looks supported by stable payouts. Yet, as always, consider your investment goals and risk tolerance before making a decision. But if you’re interested in getting into energy stocks offering value and dividends, these both look like strong options.

Should you invest $1,000 in Baytex Energy right now?

Before you buy stock in Baytex Energy, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Baytex Energy wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,750.10!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Energy Stocks

oil pump jack under night sky
Energy Stocks

Should You Buy CNQ Stock While it’s Below $45?

Investors who are positive on oil and natural gas demand are wondering if CNQ stock is good to buy for…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Buy, Sell, or Hold Suncor Stock?

A strong and healthy risk tolerance is required to keep holding a sinking stock, even if the slump is temporary.…

Read more »

Hourglass and stock price chart
Energy Stocks

Where Will Enbridge Stock Be in 5 Years?

Let's dive into the medium-term outlook for pipeline giant Enbridge (TSX:ENB) and see where this stock is headed in five…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Suncor Energy: Buy, Sell, or Hold in 2025?

Let's dive into the risks and catalysts underpinning Suncor Energy (TSX:SU) right now and see if this stock is worth…

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

2 Top Energy Stocks Canadians Should Buy Right Now

Here's why Suncor Energy (TSX:SU) and Enbridge (TSX:ENB) are two top energy stocks Canadian investors may want to consider right…

Read more »

oil and gas pipeline
Energy Stocks

Outlook for Enbridge Stock in 2025

With many new growth opportunities coming together in 2025, and continued strong fundamentals, Enbridge stock should have a good year.

Read more »

hand stacks coins
Energy Stocks

Income Investors: These Canadian Dividend Aristocrats Are Raising Payouts Again

Canadian Natural has increased its payout to 100% of cash flow, and special dividends from Tourmaline are ramping up shareholder…

Read more »

oil pump jack under night sky
Energy Stocks

Outlook for Suncor Energy Stock in 2025

Not all Canadian energy stocks are vulnerable to tariff hikes and the international oil price tug-of-war, but they can still…

Read more »