After a steep decline last summer, SandRidge Energy (SD) has spent most of the last nine months mostly in a trading range of $6 to $8 a share. However, the company has had some recent positive developments that should provide significant upside to the shares.
Positive events for SandRidge include:
- A director just picked up an additional 50,000 shares. This comes on top of other insider purchases in late March.
- Wunderlich initiated coverage on SandRidge this week as a "Buy."
- Consensus earnings estimates have finally stopped falling. Estimates for FY 2012 actually ticked up in the last week.
As per the business description from Yahoo Finance, "SandRidge Energy operates as an independent natural gas and oil company in the United States. The company engages in the exploration, development, and production of oil and gas properties."
Three additional reasons SandRidge is a solid speculative play at $6 a share:
- The stock has a dirt cheap five-year projected PEG (0.18). Analysts project over 40% revenue growth in FY 2012 and almost 30% sales growth in FY 2013.
- The stock is selling near the bottom of its five-year valuation range based on P/B, P/S and P/CF.
- The 21 analysts who cover the stock have a median price target on SandRidge of $10, more than 50% above the current stock price.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SD over the next 72 hours.