The general stock market has experienced a sharp rise, with the S&P 500 and Nasdaq climbing significantly. However, energy stocks within these indices have faced a downturn, with an average loss of around four percent. Devon Energy (NYSE:DVN), in particular, has seen its shares drop by approximately one-fourth in value, a stark contrast to the minor four percent dip in the oil benchmark WTI.
Despite the current setbacks, Devon Energy's outlook for the next year is optimistic. The company anticipates a twenty percent increase in free cash flow and plans to reduce its capital budget by nearly ten percent. These moves are expected to result in a free cash flow yield that greatly exceeds that of the broader indices.
Meanwhile, NextEra Energy (NYSE:NEE) is dealing with the effects of rising interest rates which have dampened utility investments and increased costs for funding expansion projects. Nevertheless, NextEra maintains a strong earnings growth forecast, with expectations of six to eight percent annual increases in adjusted EPS through 2026. The company's PEG ratio is currently below industry norms at two times, compared to an average of 2.5 times among peers.
Based on these financial metrics, both Devon Energy and NextEra Energy are highlighted as potential opportunities for investors seeking undervalued assets in a market where prices are generally high.
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