Welcome to Episode #458 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
It’s time to talk about the energy stocks again. When the Iran War broke out in February 2026, Tracey did several podcasts covering the top energy stocks to buy. At that time, the refining companies were cheap and earnings were expected to soar on record margins.
Over the summer, the diesel refining margins hit a record and the refinery stocks continued to hit new highs.
But now, in October 2026, it may be time for value investors to look at the oil producers. These are the companies who explore and drill for the oil. Big integrated companies will also have refining, service stations and other businesses. But the exploration and production companies are pure plays on the price of oil and natural gas.
The oil stocks are cheap. Earnings are expected to soar in the third quarter, jumping 124.9%.
But that’s in 2026. What about in 2027?
A stock can be cheap on a price-to-earnings (P/E) or price-to-sales (P/S) basis but not be a true value.
The difference between a value and a trap is the earnings growth. Are earnings on the rise for next year?
Is there expected to be further earnings growth after the big gains this year? Are analysts revising earnings estimates higher for next year?
1. Ecopetrol S.A. (EC)
Ecopetrol is a large cap integrated oil company headquartered in Colombia. It operates in Colombia, Brazil, as well as the United States and has two refineries.
Earnings are expected to jump 91.3% in 2026. But what about next year?
Ecopetrol is cheap, with a forward P/E of just 7.1. A P/E under 10 usually indicates a company has deep value. Ecopetrol is also shareholder friendly. It pays a dividend, currently yielding 3.8%.
Is Ecopetrol a value or a trap?
2. BP p.l.c. (BP)
BP is a global integrated energy company with its headquarters in London. Earnings are expected to soar 173.6% in 2026 on higher oil prices and refining margins.
Shares of BP are at 5-year highs. But it’s still cheap with a forward P/E of just 6.2. A P/E under 10 is considered a deep value. BP is a Zacks Rank #1 (Strong Buy).
BP is shareholder friendly. It pays a dividend currently yielding an attractive 4.1%.
Is the earnings growth a one-time event for BP or is it a true value?
3. Devon Energy Corp. (DVN)
Devon Energy Corp. is an American exploration and production company with a market cap of $54.9 billion. Earnings are expected to rise 37.8% in 2026.
Shares of Devon Energy are up 34% year-to-date. But Devon Energy is still cheap even with the shares moving higher this year. It trades with a forward P/E of 9.2.
Investors will also get a dividend, currently yielding 2.6%.
Devon Energy is a Zacks Rank #2 (Buy) stock. Is it too late to buy Devon or is it still a deal?
4. Diamondback Energy, Inc. (FANG)
Diamondback Energy is an American exploration and production company with a market cap of $56.3 billion. It focuses on the Permian Basin in West Texas.
Shares of Diamondback Energy are up 31% year-to-date. Earnings are expected to rise 57.4% in 2026. Yet Diamondback Energy is also still cheap. It’s forward P/E is just 9.6. A P/E under 10 indicates deep value.
Shareholders will get a dividend which is yielding 2.2%.
Is Diamondback Energy a value or a trap?
5. SM Energy Co. (SM)
SM Energy operates across four leading U.S. shale basins: the Permian Basin, DJ Basin, South Texas, and Uinta Basin. It’s a smaller operator with a market cap of just $9.2 billion.
Shares of SM Energy are up 105.5% year-to-date with earnings expected to rise 46.7% in 2026. But even with the shares soaring, it’s the cheapest of these five oil stocks. SM Energy has a forward P/E of just 4.9. That is dirt cheap.
Investors will also get a dividend, yielding 2.3%.
Is all the good news priced into SM Energy already or is there still value?
Tune into this week’s podcast to find out.
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This article originally published on Zacks Investment Research (zacks.com).
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