PEDEVCO Corp (AMEX:PED), a US$1.75M small-cap, operates in the oil and gas industry which has seen a prolonged oil price downturn since mid-2014. However, energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 12.29% 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 the oil and gas industry an attractive sector-play right now? In this article, I’ll take you through the energy sector growth expectations, as well as evaluate whether PEDEVCO is lagging or leading its competitors in the industry. See our latest analysis for PEDEVCO
What’s the catalyst for PEDEVCO’s sector growth?
The oil and gas sector has been negative 40% in the past five years, due to the oil price crash. Although profitability is always a key metric, in the oil and gas industry, growth in production and reserves has often been more important. Only now has the sector begun to emerge from its turmoil, and over the past year, the industry turnaround led to growth in the teens, beating the US market growth of 9.87%. PEDEVCO 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 PEDEVCO may be trading cheaper than its peers.
Is PEDEVCO and the sector relatively cheap?
The energy sector’s PE is currently hovering around 14.03x, relatively similar to the rest of the US stock market PE of 18.87x. 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 9.62% on equities compared to the market’s 10.49%, potentially illustrative of a turnaround. Since PEDEVCO’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PEDEVCO’s value is to assume the stock should be relatively in-line with its industry.
PEDEVCO’s track record in earnings growth shows that it has been able to keep up with its peers. If the stock has been on your watchlist for a while, now may be the time to buy, if you are not already highly concentrated in the energy industry. However, before you make a decision on the stock, I suggest you look at PEDEVCO’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 PED’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 PEDEVCO? 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.