Why I Bought This $3 Stock That Is 50% Below Consensus Price Targets

Feb.24.12 | About: Synergy Resources (SYRG)

The small-cap space continues to move higher in 2012. I especially like the action in the energy space as M&A activity is picking up and oil prices are remaining high. One of my largest moves in my portfolio was to pick up this $3 stock earlier in the week as its upside seems significant.

Synergy Resources (NYSEMKT:SYRG) - "Synergy Resources Corporation engages in the acquisition, exploitation, exploration, development, and production of oil and natural gas properties primarily located in the Wattenberg field in Denver-Julesburg Basin in northeast Colorado. As of August 31, 2011, its estimated net proved oil and gas reserves included 2,069.7 million barrels of oil and condensate, and 14.3 billion cubic feet of natural gas; and it operated 95 wells and had an ownership interest in 103 net wells". (Business Description from Yahoo Finance)

7 reasons SYRG has huge upside at just over $3 a share:

  • Insiders are positive and there has been net insider buying in the stock over the last six months.
  • Analysts project almost 200% revenue growth in FY2012 and close to 100% sales growth in FY2013.
  • It just picked up mineral leases on 8,700 new acres of promising energy producing property.
  • EPS is projected to have a huge ramp up. SYRG lost 5 cents a share in FY2011, but the company is projected to earn 29 cents a share in FY2012 and 59 cents a share in FY2013.
  • The median price target on SYRG for the four analysts that cover the stock is $5.50, more than 50% above its current price.
  • The stock is showing increasing technical strength and just crossed over its 200-day moving average (See Chart)
  • It is executing relentlessly against its very aggressive drilling plan.


(Click chart to enlarge)

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Disclosure: I am long SYRG.