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Is PEDEVCO Corp (PED) An Industry Laggard Or Leader?

PEDEVCO Corp (AMEX:PED), a USD$1.95M small-cap, is an oil and gas company operating in an industry which has persevered through a prolonged oil price downturn since 2014. However, energy-sector analysts are forecasting for the entire industry, a positive double-digit growth of 24.71% in the upcoming year , and an enormous 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. 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 PED is lagging or leading its competitors in the industry. View our latest analysis for PEDEVCO

What’s the catalyst for PED’s sector growth?

AMEX:PED Past Future Earnings Nov 4th 17
AMEX:PED Past Future Earnings Nov 4th 17

The oil price collapse drove a negative 40% growth in the energy sector in the past five years. Large energy businesses have slashed their growth expenditures by over 40% since the collapse, and reduced headcount by nearly half a million workers. Over the past year, the industry saw negative growth of -58.71%, underperforming the US market growth of 4.49%. PED leads the pack with its impressive earnings growth of 27.05% over the past year. This proven growth may make PED a more expensive stock relative to its peers.

Is PED and the sector relatively cheap?

AMEX:PED PE PEG Gauge Nov 4th 17
AMEX:PED PE PEG Gauge Nov 4th 17

Oil and gas companies are typically trading at a PE 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 PED’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PED’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? PED 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 PED as part of your portfolio. However, if you’re relatively concentrated in oil and gas, you may want to value PED based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If PED 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 PED’s cash flows and assess whether the stock is trading at a fair price.

For a deeper dive into PEDEVCO’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.