I last wrote about Continental Resources (CLR) in November when it was trading at $70 a share. The largest energy producer in the Bakken has been on a roll since that time rising some 30%. However, the good news on the Bakken juggernaut keeps coming and the shares still have upside.
Recent positives:
- JP Morgan just upgraded the shares to "Outperform" from "Neutral". The firm has a $122 a share price target on the stock.
- Consensus earnings estimates for both FY2013 and FY2014 have risen over 5% over the last two months.
- Deutsche Bank initiated the shares as a "Buy" in January.
- Its recent earnings report showed it made a profit of $1.04 a share, well above consensus estimates of 87 cents a share.
4 reasons CLR still has upside from $91 a share:
- Earnings per share are increasing rapidly. The company made under a $1 a share in FY2010, over $2 in FY2011, and just under $3.50 a share in FY2012. Analysts project CLR will make $5 a share in FY2013 and over $6.50 in FY2014.
- The company has grown revenues at better than a 20% CAGR over the last five years. That rate of increase in accelerating. Analysts expect better than 40% revenue growth in FY2013 and above 30% in FY2014. The stock sells for a minuscule five year projected PEG (.48).
- Given this growth, the stock is still cheap at just 13.5x 2014's projected earnings.
- The quality of earnings is solid, evidenced by an increase of operating cash flow of 150% over the last three years.
Disclosure: I am long CLR.
