Amyris Inc (NASDAQ:AMRS), a US$334.45M small-cap, is an oil and gas company operating in an industry which has seen a continued decline in oil prices since 2014. However, energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 19.74% in the upcoming year , and a massive growth of 49.48% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is the oil and gas industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Amyris is lagging or leading its competitors in the industry. See our latest analysis for Amyris
What’s the catalyst for Amyris’s sector growth?
Over the past couple of years, the energy sector delivered a disappointing 40% negative growth rate, driven by the oil price collapse. Large energy businesses have slashed their growth expenditures by over 40% since the collapse, and reduced headcount by nearly half a million workers. Only now has the sector begun to emerge from its turmoil, and over the past year, the industry turnaround led to growth in the twenties, beating the US market growth of 13.44%. Amyris leads the pack with its impressive earnings growth of 52.72% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Amyris poised to deliver a 79.62% growth over the next couple of years compared to the industry’s 19.74%.
Is Amyris and the sector relatively cheap?
Oil and gas companies are typically trading at a PE of 13.51x, in-line with the US stock market PE of 18.25x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.54% on equities compared to the market’s 11.12%, potentially illustrative of a turnaround. Since Amyris’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Amyris’s value is to assume the stock should be relatively in-line with its industry.
Amyris’s industry-beating future is a positive for investors. If Amyris has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the energy industry. However, before you make a decision on the stock, I suggest you look at Amyris’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AMRS’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Amyris? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.