The stock of Suncor Energy (TSX:SU) has shown significant growth this year, with a 30% increase year to date, exceeding the TSX Composite Index. If an investor had put $10,000 into Suncor stock at the beginning of the year, they would have seen a $3,000 return by now, not including the 3.91% dividend yield.
The strong performance of Suncor Energy stock in line with the increase in oil prices, with the stock outperforming the commodity it sells by three times. While this may suggest the stock is overvalued, there are other factors to consider. Despite the impressive rise, there may still be room for further growth. In this analysis, we will explore why Suncor stock could still be a good investment opportunity.
As an exploration and production (E&P) oil company, Suncor’s performance is linked to oil prices. The recent increase in oil prices has contributed to Suncor’s success. Understanding the reasons behind the rise in oil prices is crucial in evaluating Suncor’s future prospects.
The rise in oil prices can be attributed to increasing demand for oil and a reduction in supply due to output cuts by OPEC and Russia. While some factors contributing to higher prices may be short-term, others could have a lasting impact.
Suncor Energy’s latest earnings report reflects the positive impact of rising oil prices. The company reported $1.6 billion in adjusted operating earnings, a 29.7% increase from the previous quarter, along with other positive financial indicators.
Overall, Suncor Energy has benefitted from the rise in oil prices, with improved earnings and reduced debt. While the future trajectory of oil prices is uncertain, Suncor’s strong financial performance and operational efficiency position the company for continued success. Consideration should be given to investing in SU stock at this time.
