Energy stocks were one of the poorer performing areas in the huge rally during the first quarter of 2012. The sector underperformed the overall market by over 6% in March alone. Given oil prices have remained over $100 a barrel, the upcoming driving season and the escalating situation in Iran; I believe oil prices should remain elevated and the sector should bounce back in the second quarter. One relatively unknown energy stock with rapidly increasing revenues and a solid valuation I like here is Gulfport Energy (GPOR).
Gulfport Energy Corporation
Business description from Yahoo Finance (here)
Gulfport Energy Corporation engages in the exploration, development, and production of oil and natural gas properties. Its principal properties are located in the Louisiana Gulf Coast, in west Texas in the Permian Basin and in western Colorado in the Niobrara Formation. The company also holds acreage position in the Alberta oil sands in Canada; and interests in entities that operate in southeast Asia, including the Phu Horm gas field in Thailand, as well as leasehold interests in the Utica Shale in eastern Ohio.
7 reasons Gulfport Energy is a solid value at $29 a share:
- The consensus price target for the 12 analysts that cover the stock is $41.50 a share, which is approximately 40% above the current stock price.
- The company has managed to raise EPS by an average of 12% a year even with the slow growth over the last five years.
- GPO sells in the bottom half of its five year valuation range based on P/CF, P/E, P/B, and P/S.
- Analysts have the company raising revenues by over 25% for both FY2012 and FY2013.
- The company has rapid earnings growth ahead of it. GPOR made $2.20 a share in FY2011, and analysts have it making $2.58 in FY2012 and escalating to $3.07 in FY2013. Despite low natural gas prices, consensus estimates for FY2012 and FY2013 have risen over the last three months.
- The stock is selling for just over 9 times forward earnings and a very cheap five year projected PEG (.24).
- It has a solid balance sheet ($90mm in net cash) and tripled operating cash flow from FY2009 to FY2011.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GPOR over the next 72 hours.