Insiders Buy $1 Million In New Shares In This Beaten Down Energy Concern

Jun.11.12 | About: SM Energy (SM)

The recent fall in oil prices as well as continuing low natural gas prices has contributed to a large selloff in the energy sector. However, some of these firms have excellent long term growth prospects an investor can now get at discounted prices. Averaging in with small buys is probably a good strategy for this volatile area of the market. One energy stock I like here is an independent named SM Energy (NYSE:SM).

"SM Energy Company , an independent energy company, together with its subsidiaries, engages in the acquisition, exploration, exploitation, development, and production of crude oil, natural gas, and natural gas liquids in North America." (Business description from Yahoo Finance)

7 reasons SM Energy should reward long term value investors at $51 a share:
 

  • The stock is selling near the bottom of its five year valuation range based on P/S, P/CF and P/S.
  • Insiders have picked up over a $1mm in new shares over the last couple of weeks.
  • The stock now has a forward PE of just over 12, a large discount to its five year average (29.1)
  • The company's operating cash flow increased 75% from FY2009 to FY2011 and continues to improve in FY2012.
  • The company is expected to grow revenues over 25% for both FY2012 and FY2013 and has a five year projected PEG of under 1 (.92).
  • It is more than 70% below the stock's median price target of $92 by the 23 analysts that cover the firm.
  • Its production mix has improved to 45% liquids, and it plans to be over 50% liquids production by FY2014.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SM over the next 72 hours.