Birchcliff Energy Ltd (TSX:BIR), a CA$877.13M small-cap, operates in the oil and gas industry which has persevered through a continued decline in oil prices since 2014. However, energy-sector analysts are forecasting for the entire industry, negative growth in the upcoming year . 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, as well as evaluate whether Birchcliff Energy is lagging or leading its competitors in the industry. Check out our latest analysis for Birchcliff Energy
What’s the catalyst for Birchcliff 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. Large energy businesses have slashed their growth expenditures by over 40% since the collapse, and reduced headcount by nearly half a million workers. However, recently the sector saw a reversal in the downturn, and in the past year, the industry turnaround delivered growth in the teens, though still underperforming the wider Canadian stock market. Birchcliff Energy leads the pack with its impressive earnings growth of 15.61% over the past year. This proven growth may make Birchcliff Energy a more expensive stock relative to its peers.
Is Birchcliff Energy and the sector relatively cheap?
The energy sector’s PE is currently hovering around 14.59x, in-line with the Canadian stock market PE of 16.48x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 6.45% compared to the market’s 9.20%, illustrative of the recent sector upheaval. Since Birchcliff Energy’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Birchcliff Energy’s value is to assume the stock should be relatively in-line with its industry.
Birchcliff Energy recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the energy industry. However, before you make a decision on the stock, I suggest you look at Birchcliff Energy’s fundamentals in order to build a holistic investment thesis.
- 1. 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.
- 2. Historical Track Record: What has BIR’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.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Birchcliff Energy? 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.