Are Woodside shares dirt cheap at two-year lows?

This energy giant's shares just hit a two-year low.

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Woodside Energy Group Ltd (ASX: WDS) shares may be pushing higher this afternoon, but that wasn't the case in early trade.

At one stage, the energy giant's shares tumbled 1% to a two-year low of $28.19.

When its shares hit that level, it meant that they were down approximately 17% on a 12-month basis.

As a comparison, the ASX 200 index is up approximately 4.5% over the same period.

Are Woodside shares good value now?

One broker that sees significant value in the company's shares at current levels is Morgans.

A note out of the broker from last week reveals that its analysts have an add rating and a $36.00 price target on its shares.

Based on where Woodside shares currently trade, this implies a potential upside of 27% for investors over the next 12 months.

But the returns won't stop there. Morgans expects some attractive dividend yields from the company over the next couple of years.

Its analysts have pencilled in fully franked dividends per share of $1.25 in FY 2024 and then $1.57 in FY 2025. This equates to dividend yields of 4.4% and 5.5%, respectively.

This boosts the total potential 12-month return to approximately 31%.

To put that into context, if Morgans is on the money with its recommendation, a $20,000 investment would turn into $26,200 in a year.

Why is it bullish?

The broker likes Woodside due to its high-quality earnings and cheap valuation. It also expects its acquisition strategy to continue and support its growth. Morgans explains:

A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS's share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions.

Another reason the broker is bullish on Woodside shares is that it has maintained a strong balance sheet despite its capital expenditure. It adds:

Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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