Inflation is back in the spotlight, with the Federal Reserve expected to lift rates by a total of 75 basis points this year as energy costs and sticky prices keep pressure on borrowing costs and government finances. That kind of backdrop often rewards companies that can manage costs, protect margins, or pass higher prices through to customers. This article looks at 3 stocks from our Inflation Beneficiary Stocks screener that appear exposed to the latest inflation and rate hike news, and explains why some investors might see them as potential beneficiaries while others may prefer to stay cautious.

Devon Energy (DVN)

Overview: Devon Energy is an independent US energy producer focused on exploring and producing oil, natural gas, and natural gas liquids across several major shale basins including the Delaware, Eagle Ford, Anadarko, Williston, and Powder River.

Operations: Devon generates all of its roughly US$16.0b in revenue from oil and gas exploration and production activities in the United States.

Market Cap: US$48.6b

Devon Energy is squarely in the spotlight as higher inflation is being driven by an energy shock and interest rates are expected to rise further, while the company has just completed a merger with Coterra to create a larger, more oil weighted producer with a focus on free cash flow and shareholder returns. Investors watching inflation beneficiary stocks may be interested in Devon’s high quality shale assets, use of data analytics to improve efficiency, and plans to return up to 70% of free cash flow through dividends and buybacks. However, they also need to weigh risks such as exposure to oil and gas price swings, higher debt, governance turnover, and ongoing ESG and regulatory pressure.

Devon’s larger, more oil-weighted profile and emphasis on free cash flow raise a key question: is the current story fully reflected in the numbers, or are investors missing something in the DCF valuation analysis for Devon Energy?

Valeura Energy (TSX:VLE)

Overview: Valeura Energy is an upstream oil and gas company that explores for, develops, and produces petroleum and onshore natural gas. Its activities are primarily through offshore fields in Thailand and legacy interests in Turkey, with its head office in Singapore.

Operations: Valeura Energy generates about US$542.2m in revenue from oil and gas exploration and production, with the business largely tied to Thai operations that report US$558.5m in revenue.

Market Cap: CA$1.2b

Valeura Energy is closely linked to the inflation story because its fortunes hinge on oil pricing and how efficiently it can pull barrels out of the Gulf of Thailand. Investors watching inflation beneficiary stocks may be drawn to the company’s Thai production, including recent drilling at Nong Yao that lifted output and showcased more complex well designs, as well as plans to use tax losses in Thailand to support future after tax cash flows. At the same time, thin net margins, a high P/E relative to peers, reliance on external borrowing, and execution risk around projects like the Wassana redevelopment all contribute to an ongoing market debate about how much of Valeura’s potential is already reflected in the price.

Valeura Energy’s Thai barrels, tax losses and premium P/E suggest investors may be missing a key angle on risk versus reward, and the 3 key rewards and 1 important warning sign could reveal what the current share price is really pricing in

Yancoal Australia (ASX:YAL)

Overview: Yancoal Australia is a large coal producer that explores, mines, and sells metallurgical and thermal coal from multiple operations across New South Wales, Queensland, and Western Australia to power utilities and steelmakers across Asia, Europe, and other export markets.

Operations: Yancoal generates most of its revenue from Coal Mining in New South Wales at about A$5.2b, with additional A$593m from Coal Mining in Queensland and smaller contributions from corporate and unallocated items such as sea freight, other revenue, interest income, and royalty revenue.

Market Cap: A$7.8b

Yancoal Australia sits at the center of the current inflation story because coal prices often move with energy inflation, and its portfolio of export focused mines gives it direct exposure to power and steel demand across Asia. Forecast earnings growth of 21.27% a year and a P/E that is slightly below the Australian market suggest some investors see room for improvement, even though the stock is trading at a premium to estimated cash flow value. At the same time, falling net margins, low 4.9% ROE, high reliance on external borrowing, and governance questions around board independence mean the risk side of the equation cannot be ignored. The real question is how these positives and pressure points add up in a world of higher rates and persistent inflation.

Yancoal Australia’s coal exposure, export reach and rate sensitivity could be telling a different story than its P/E suggests. The 2 key rewards and 2 important warning signs might explain what the market has not fully priced in yet.

The three stocks covered here are just a starting point, and the full Inflation Beneficiary Stocks screener surfaces 32 more companies with equally compelling narratives through the Inflation Beneficiary Stocks screener. Use Simply Wall St to identify, filter and analyze the specific catalysts and stories that matter to you so you can focus on the highest conviction ideas for your watchlist.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.