While the oil and gas industry has remained volatile, for investors seeking profit through share growth, there are still some values to be found, while being mindful of both good and not-so-good news for some companies of late. In this article, I will discuss why I feel that Kodiak Oil & Gas Corp (KOG) could be a fantastic opportunity for investors who seek growth in both the short and the long term.
Analyzing Kodiak's Fundamentals
Kodiak has a market cap of just under $2.5 billion. Although its P/E ratio stands a bit high at 24.83, the shares show a modest EPS of $0.36. Although the company does not currently pay a dividend, investors may very well profit from share growth on this potential up-and-comer.
In fact, this one could be rated as a great value play. The company's share value more than doubled between October 2011 and late February 2012, before pulling back again in the spring. And, with a potential bottoming-out in the summer of 2012, the shares have been pushing higher ever since.
With Kodiak's second quarter 2012 net income of over $93 billion, or $0.35 per share, its numbers have surged in comparison to $14 million, or $0.08 per share, just one year prior. During this same time, Kodiak's quarterly revenue rose to nearly $86 million. This is up from just over $22 million for the second quarter of 2011.
Kodiak has seen some wild swings in terms of share price over just the past year. With company management targeting 27,000 barrels of daily production by the end of 2012 - a number that is roughly double its recent production amount - there could be a somewhat bumpy ride ahead. However, that being said, the firm is expected to vastly increase revenue - from full-year 2012 of $469 million to full-year 2013 of $823 million - giving Kodiak a yearly sales growth of just over 291% and annual growth of earnings per share of 370%. With all of that, recent share price could truly be a bargain.
How Other Energy Contenders Stack Up
Also moving along quite nicely is CenterPoint Energy, Inc. (CNP). With a market cap of just below $8.75 billion, this company brought in second quarter 2012 revenue of a tad under $1.9 billion. With CenterPoint's quarterly earnings coming in above the $0.27 that analysts estimated, the company's yearly 2012 earnings estimates have also been raised to between $1.13 and $1.23. This has, in turn, led Wells Fargo analysts to raise CenterPoint's shares recently from market perform to outperform.
One energy company that seems to be in the public interest of late, but not necessarily in a good way, is Chesapeake Energy Corporation (CHK) - most recently seen at the Republican National Convention in Tampa, FL, and stating that even though that particular state only offers five natural gas fueling stations, the state is a great market for this ecological commodity.
Chesapeake has also recently been the target of some lawsuits, many of which have to do with breaching of fiduciary duty. In addition, the company is hoping to raise some much needed cash by selling off some of its assets, however, as of yet, no major sales have been initiated.
Certainly, Chesapeake's share value has been negatively affected by all of this commotion. With a market cap of just under $13 billion, earnings per share stand at a tad above 3, with a P/E ratio of 6.37. Given the potential for further drop in share price, investors may want to steer clear of this one, at least in the near term.
Another to steer clear of for the moment is FirstEnergy (FE). With the recent announcement by the company that profits have declined by 8% in the second quarter of 2012 - due in large part to lower revenue at the company's regulated distribution segment, as well as from lower sales margins from the firm's competitive operations - FirstEnergy's quarterly earnings estimates have been lowered from $0.69 to $0.59. In light of this, fiscal earnings estimates have also been decreased to $3.30 per share from the previous estimate of $3.60.
One of the other bright spots in the energy sector is SandRidge Energy (SD). SandRidge doesn't offer a dividend to its investors, however in this case, share growth could actually outweigh this lack of regular income.
With a 2012 estimated earnings per share of $0.13, analysts expect a dramatic EPS rise to $0.23 for 2013. One big reason for this is that SandRidge is expected to continue drilling wells at an accelerated pace throughout the short term - a strategy that should help in ensuring that its quarterly outputs exceed the company's production targets. In addition, with SandRidge's company management's three-year plan to raise EBITDA to $2 billion, it is also expected that SandRidge investors may be able to ride up share price over both sooner and later.
The Bottom Line
Given Kodiak's stellar second quarter 2012 income, revenue, and resulting earnings per share, some analysts have rated the shares as a buy - and I fully agree. Revenue between second quarter 2011 and the same quarter of 2012 nearly quadrupled, as did earnings per share. And, although shares fell back a bit in mid-2012, they are currently coming back quite nicely. I feel that Kodiak is a great value play for anyone seeking both short- and long-term share growth - especially if the shares can be purchased for under $9.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.