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Rex Energy Corporation (NASDAQ:REXX), a US$7.15M 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 somewhat weaker growth of 8.29% in the upcoming year , and a robust short-term growth of 19.79% over the next couple of years. This rate is larger than 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, and also determine whether Rex Energy is a laggard or leader relative to its energy sector peers. See our latest analysis for Rex Energy
What’s the catalyst for Rex Energy’s sector growth?
The oil price collapse triggered a wave of cost reduction among energy businesses as the sector as a whole faced negative growth over the past five years. 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 11.54%. Rex 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 Rex Energy may be trading cheaper than its peers.
Is Rex Energy and the sector relatively cheap?
Oil and gas companies are typically trading at a PE of 12.42x, lower than the rest of the US stock market PE of 18.25x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.72% on equities compared to the market’s 10.60%, potentially illustrative of a turnaround. Since Rex Energy’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Rex Energy’s value is to assume the stock should be relatively in-line with its industry.
Rex 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 Rex Energy’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 REXX’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 Rex 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.