NYSE Energy Industry: A Deep Dive Into Comstock Resources Inc (NYSE:CRK)
Comstock Resources Inc (NYSE:CRK), a US$112.62M small-cap, operates in the oil and gas industry which has endured a prolonged oil price downturn since 2014. However, energy-sector analysts are forecasting for the entire industry, a relatively muted growth of 8.32% 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. Is now the right time to pick up some shares in oil and gas companies? Below, I will examine the sector growth prospects, as well as evaluate whether Comstock Resources is lagging or leading its competitors in the industry. Check out our latest analysis for Comstock Resources
What’s the catalyst for Comstock Resources’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. 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 twenties, beating the US market growth of 10.11%. Comstock Resources leads the pack with its impressive earnings growth of 74.59% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Comstock Resources poised to deliver a 55.15% growth over the next couple of years compared to the industry’s 8.32%.
Is Comstock Resources and the sector relatively cheap?
Oil and gas companies are typically trading at a PE of 13.08x, below the broader US stock market PE of 18.85x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.31% on equities compared to the market’s 10.38%, potentially illustrative of a turnaround. Since Comstock Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Comstock Resources’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Comstock Resources’s industry-beating future is a positive for investors. If Comstock Resources 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 Comstock Resources’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 CRK’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 Comstock Resources? 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.
