Final yr was robust for fairness markets as rising rates of interest, excessive inflation, and the Russia-Ukraine conflict weighed on traders’ sentiments, dragging down inventory costs. Nevertheless, the imposition of sanctions on Russia raised oil costs, benefiting the vitality sector, which outperformed the broader fairness markets. Amid the beneficial circumstances, Suncor Vitality (TSX:SU) and Enbridge (TSX:ENB) returned round 41% and 14%, respectively.

Going ahead, which of the 2 shares could be a greater purchase proper now? Let’s take a look at their progress prospects and valuations.

Suncor Vitality

Though oil costs have cooled down significantly from their March highs, analysts are bullish on oil. They cite provide considerations and demand restoration as a result of easing of restrictions in China as worth drivers. The truth is, analysts at RBC Capital Markets consider oil costs have already bottomed out for this yr and will solely transfer North. Given its long-life, low-decline asset base, Suncor Vitality expects to interrupt even at WTI (West Texas Intermediate) oil buying and selling above US$35/barrel.

With WTI oil at present buying and selling round US$77/barrel and anticipated to rise additional, I consider Suncor Vitality will ship strong financials this yr. In addition to, the corporate expects to make a capital funding of $5.4–$5.8 billion this yr. Additional, administration plans to extend its investments by $100 million yearly by way of 2027. Supported by these investments and optimization initiatives, Suncor hopes to develop its EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) by 40% over the subsequent 5 years at a CAGR (compound annual progress fee) of seven%. So, the corporate’s progress prospects look optimistic.

With the sturdy money flows during the last two years, Suncor Vitality repurchased 6% of excellent shares in 2021 whereas focusing on 10% in 2022. It has lowered its debt ranges and strengthened its steadiness sheet by divesting its companies in Norway and the UK. The corporate additionally raised its dividends twice final yr, with its yield for the subsequent 12 months at present standing at 4.6%. Regardless of its wholesome progress prospects, SU inventory trades at 6.8 instances its projected earnings for the subsequent 4 quarters.

Enbridge

Enbridge is a midstream vitality firm that transports oil and pure gasoline throughout North America. It additionally has a wholesome presence within the renewable vitality area. Amid rising vitality demand and elevated LNG (liquefied pure gasoline) exports to Europe from North America, Enbridge posted a strong efficiency within the first 9 months of 2022. Its adjusted EBITDA and DCF (distributable money movement) grew by 12.7% and 10.1%, respectively.

In the meantime, Enbridge is taking a look at increasing its asset base to satisfy manufacturing progress pushed by rising LNG exports. It has a secured capital backlog of $17 billion. Additional, the Tri International Vitality acquisition has strengthened its footprint within the renewables area. Tri International Vitality has a backlog of three gigawatts of improvement initiatives, which it expects to place into service between 2024 and 2028. So, the corporate affords strong progress prospects.  

Notably, Enbridge has a strong monitor document of elevating its dividends. It has elevated its dividends uninterruptedly for the earlier 28 years. ENB’s dividend yield for the subsequent 12 months stands at a horny 6.52%. What’s extra, it trades at an affordable valuation, with its NTM price-to-earnings standing at 18. 

Backside line

Though Suncor Vitality affords larger progress prospects and trades at a less expensive valuation, oil costs could have a direct say in its financials. With central banks specializing in combating inflation by way of financial tightening initiatives, few analysts count on a world slowdown, which may impression oil costs.

So, given the chance related to the inventory, Suncor Vitality could be a superb purchase for traders with larger risk-taking skills. Given its low-risk, regulated enterprise and excessive dividend yield, Enbridge could be preferrred for conservative and income-seeking traders.