Devon Energy Corporation DVN is currently trading at a discount relative to its industry based on its trailing 12-month Enterprise Value to EBITDA (EV/EBITDA TTM) basis. With a valuation of 3.45X, it is lower than the Zacks Oil and Gas - Exploration and Production - United States industry average of 10.18Xand is trading below its five-year median of 4.22X.

DVN has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon Energy also has a diverse commodity mix, having a balanced exposure to oil, natural gas and natural gas liquid production volumes. The company continues to produce strong, thanks to the contribution from its multi-basin assets.

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Devon Energy is attractively valued compared with other companies like Range Resources RRC and Comstock Resources, Inc. CRK operating in the same industry, having EV/EBITDA TTM of 9.19X and 11.07X, respectively.

Should you consider adding the DVN stock to your portfolio only based on an attractive valuation? Let us delve deeper and find out the factors that can help investors decide whether it is a good entry point to add the DVN stock to their portfolio.

Multi-Basin Assets Aid DVN Stock

Devon Energy’s multi-basin portfolio and focus on high-quality assets continue to boost its production. Strategic acquisitions and divestitures of non-core assets enable the company to concentrate on core assets.

Devon Energy completed the acquisition of Grayson Mill Energy, adding a high-margin production mix in its portfolio. This acquisition is expected to triple the total production volume to 150,000 barrels of oil equivalent per day (Boe/d) from 50,000 Boe/d earlier expected from Williston Basin.

Devon Energy possesses assets that can deliver sustainable production for many years into the future, and provide reliable and affordable energy to its customers. The assets currently owned by DVN can sustain the production levels for more than 10 years. The ongoing exploration activities continue to replenish production volumes and add reserves.

Devon Energy’s Low-Cost Operation Boosts Margin

DVN’s low-cost operation boosts its margins. Devon Energy is also working to reduce its drilling and completion costs, and is aligning personnel with the go-forward business.

Devon Energy also has a diverse commodity mix, with a balanced exposure to oil, natural gas and natural gas liquid production volumes. The company continues to evaluate opportunities to add more high-quality resources to its portfolio.

Due to cost management, production costs, including taxes, averaged $11.39 per Boe in the third quarter of 2024, a decline of 7% from the prior period. The cost savings will continue to boost the company’s margins.

DVN Stock Returns Better Than Industry

Devon Energy’s return on invested capital (ROIC) has outperformed the industry average in the trailing 12 months. ROIC of DVN was 8.51% compared with the industry average of 7.03%. The ROIC measures how well a company generates returns on the money it invests. ROIC is a key indicator of a company's profitability and operational efficiency. The ROIC of the company indicates that it is investing money more efficiently than its peers in the industry.

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Range Resources and Comstock Resources’ ROICs are currently pegged at 8.49% and 2.37%, lower than Devon Energy's level.

Devon Stock’s Earnings Surprise

The company’s earnings in the last four reported quarters were better than estimates. Devon Energy registered an average positive earnings surprise of 8.63% in the last four quarters.

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DVN’s Earnings Estimates Decline

The Zacks Consensus Estimate for Devon Energy’s 2025 and 2026 earnings per share has decreased 3.3% and 2.57%, respectively, in the past 60 days.

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DVN’s Stock Price Performance

The stock has fallen 25% in the last three months compared with the 38.2% decline in the industry.

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Summing Up

Devon Energy benefits from the contributions from its multi-basin assets, which generate ample free cash flow and assist the company in strengthening its balance sheet. The company has a balanced exposure to oil, natural gas and NGL production, adding to its advantage.

Despite a negative revision in earnings estimates, investors can consider adding the stock to their portfolio as it currently has a VGM Score of B and is trading at a discount. Its strong ROIC and VGM Score indicate a robust performance.

Those who already own this Zacks Rank #3 (Hold) stock would do well retaining it in their portfolio.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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