It is no secret that the U.S. has a secret that could prove to be a savior for our economy: oil. Recent studies have suggested that the United States has enough oil reserves to be called the next "Saudi Arabia." This is significant because not only can we fuel ourselves rather than buying all of our oil from places like Iran, but it also creates a lot of jobs. The increase in jobs translates to a higher standard of living and more consumer spending, which leads to a nice boost for the economy. If you wanted to play the oil boom, some names that would come to your mind are possibly Exxon Mobil (NYSE: XOM) or Chevron Corporation (NYSE: CVX). I have an alternative idea that could have more upside potential: Mitcham Industries Inc. (NASDAQ: MIND). The special thing about Mitcham is that is supplies seismic imagery equipment and services that help oil companies explore for lush pockets of oil. This is an essential step in the exploration process. Since it is a service that is in demand right now, it is likely that Mitcham will thrive in the coming years while some oil stocks could be a hit or miss.
Fundamentally, Mitcham has a market cap of $212.89 million and currently has a price-to-earnings ratio of 9.26. Forward price to earnings comes in at 9.70 and the stock is currently undervalued to its future earnings growth or PEG of 0.62. Furthermore, the company has minimal debt with its debt-to-equity ratio coming in at a very small 0.08. Meanwhile, Mitcham shows cash per share is at $1.87, which translates to a solid financial strength as can be seen with a current ratio of 8.22. Earnings per share are expected to skyrocket 334 percent this year, 65 percent next year and 15 percent over the next five years. What are even more impressive are the company's margins. Mitcham shows its gross margin at 44 percent, operating margin at 23 percent and profit margin at a whopping 21 percent. This is significant because not only is the company very financially stable but it keeps a significant part of its profits.
Looking at technical analysis, Mitcham recently hit its upside resistance just below $18 and currently is retreating. The stock currently is trading at $16.58 and looks like it could hit its horizontal support of $15. If you choose to enter here, make sure that $15 level holds, if not there could be a long fall ahead. That being said, I do not see that $15 market being broken given the demand for its services and equipment.
The bottom line here is that the American oil boom is coming and oil companies are starting to get very competitive for land and drilling operations. Part of the exploration process is looking at seismic graphs and equipment to determine whether one piece of land would contain more oil reserves than another. This is vital knowledge that oil companies will need to maximize their resources and profits.