Camber Energy Inc (AMEX:CEI), a USD$5.53M small-cap, operates in the oil and gas industry which has endured an extended oil price slump since 2014. However, energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 24.71% in the upcoming year, and a massive growth of 43.94% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Should your portfolio be overweight in the oil and gas sector at the moment? In this article, I’ll take you through the energy sector growth expectations, as well as evaluate whether CEI is lagging or leading its competitors in the industry. Check out our latest analysis for Camber Energy
What’s the catalyst for CEI's sector growth?
Much of the oil and gas industry has survived an especially tough few years with weak demand and low prices. Global oil and gas companies cut capital expenditures by about 40% during 2014 and 2016, and as part of this cost cutting initiative, some 400,000 workers were let go, with major projects cancelled or deferred. Over the past year, the industry saw negative growth of -58.71%, underperforming the US market growth of 4.49%. CEI leads the pack with its impressive earnings growth of 60.53% over the past year. This proven growth may make CEI a more expensive stock relative to its peers.
Is CEI and the sector relatively cheap?
The oil and gas industry is trading at a PE ratio of 21x, in-line with the US stock market PE of 22x. 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 8.54% on equities compared to the market’s 9.99%, potentially illustrative of a turnaround. Since CEI’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CEI’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CEI 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 CEI as part of your portfolio. However, if you’re relatively concentrated in oil and gas, you may want to value CEI based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If CEI 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 CEI’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.