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Is Southwestern Energy Company (NYSE:SWN) Still A Cheap Oil & Gas Stock?

Southwestern Energy Company (NYSE:SWN), a US$2.03B mid-cap, operates in the oil and gas industry which has endured a prolonged oil price downturn since mid-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 Southwestern Energy is lagging or leading its competitors in the industry. View our latest analysis for Southwestern Energy

What’s the catalyst for Southwestern Energy’s sector growth?

NYSE:SWN Future Profit Feb 23rd 18
NYSE:SWN Future Profit Feb 23rd 18

In the past five years, the oil and gas industry growth has been negative 40%, as a result of the oil price collapse. 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. However, recently the sector saw a reversal in the downturn, and in the previous year, the industry saw growth in the twenties, beating the US market growth of 10.11%. Southwestern Energy leads the pack with its impressive industry-beating growth rate of 32.52% in the upcoming year.

Is Southwestern Energy and the sector relatively cheap?

NYSE:SWN PE PEG Gauge Feb 23rd 18
NYSE:SWN PE PEG Gauge Feb 23rd 18

The oil and gas industry is trading at a PE ratio of 13.12x, below the broader US stock market PE of 18.8x. 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. On the stock-level, Southwestern Energy is trading at a lower PE ratio of 5.87x, making it cheaper than the average oil and gas stock. In terms of returns, Southwestern Energy generated 30.39% in the past year, which is 20.08% over the oil and gas sector.

Next Steps:

Southwestern Energy’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its energy peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. However, before you make a decision on the stock, I suggest you look at Southwestern Energy’s fundamentals in order to build a holistic investment thesis.


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.

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