Bellatrix Exploration Ltd (TSX:BXE), an energy company based in Canada, received a lot of attention from a substantial price movement on the TSX in the over the last few months, increasing to CA$2.43 at one point, and dropping to the lows of CA$1.3. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Bellatrix Exploration’s current trading price of CA$1.35 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bellatrix Exploration’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Bellatrix Exploration
What is Bellatrix Exploration worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.086x is currently trading slightly below its industry peers’ ratio of 1x, which means if you buy Bellatrix Exploration today, you’d be paying a relatively reasonable price for it. And if you believe that Bellatrix Exploration should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Bellatrix Exploration’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Bellatrix Exploration?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 69.24% over the next couple of years, the future seems bright for Bellatrix Exploration. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? BXE’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at BXE? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on BXE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for BXE, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Bellatrix Exploration. You can find everything you need to know about Bellatrix Exploration in the latest infographic research report. If you are no longer interested in Bellatrix Exploration, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.