Camber Energy Inc (AMEX:CEI), a USD$8.95M small-cap, operates in the oil and gas industry which has seen an extended oil price slump since 2014. However, energy-sector analysts are forecasting for the entire industry, a positive double-digit growth of 11.87% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the oil and gas sector right now. Below, I will examine the sector growth prospects, and also determine whether Camber Energy is a laggard or leader relative to its energy sector peers. View our latest analysis for Camber Energy
What’s the catalyst for Camber Energy’s sector growth?
In the past five years, the oil and gas industry growth has been negative 40%, as a result of the oil price collapse. Although profitability is always a key metric, in the oil and gas industry, growth in production and reserves has often been more important. However, recently the sector saw a reversal in the downturn, and over the past year, the industry turnaround led to growth in the teens, beating the US market growth of 10.81%. Camber Energy lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Camber Energy may be trading cheaper than its peers.
Is Camber Energy and the sector relatively cheap?
Oil and gas companies are typically trading at a PE of 15x, relatively similar to the rest of the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 9.13% on equities compared to the market’s 10.46%, potentially illustrative of a turnaround. Since Camber Energy’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Camber Energy’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Camber Energy recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Camber Energy as part of your portfolio. However, if you’re relatively concentrated in oil and gas, you may want to value Camber Energy based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Camber Energy has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the oil and gas industry. Before you make a decision on the stock, take a look at Camber Energy’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Camber Energy’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other energy stocks instead? Use our free playform to see my list of over 300 other oil and gas companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.