The energy sector has been a painful place for investors to be over the past quarter. However, it appears that energy prices are stabilizing and the stocks in the space are behaving better in the market over the last few trading sessions. Some equities, in addition to having cheap valuations, are starting to attract significant insider buying. One such firm is Stone Energy (SGY).
7 reasons SGY is a great value play at just $24 a share:
- A director added a $2mm purchase to his shares last week.
- The stock price would have to increase by some 60% to approach the $41 median price target held by the nine analysts that cover the shares.
- The stock is in the bottom third of its five year valuation range based on P/E, P/CF and P/B.
- SGY is selling for less than six times forward earnings, cheap and a discount to its five year average (8.1).
- The company missed earnings estimates last quarter. However, it had previously beat estimates for each of the five quarters prior to that. In addition, the average beat over consensus in the last four quarter even with the miss is north of 14%.
- The stock is cheap at less than 3 times operating cash flow. In the first quarter, the company's production was 55% oil & liquids based mitigating somewhat the impact from low natural gas prices.
- The stock looks like has built short term technical support at the $23 price level (see chart).
(Click to enlarge)
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SGY over the next 72 hours.
