Every time we fill up our gas tank we are reminded that we are living in a different era. Unfortunately, higher prices are not limited to the fuel we purchase at the gas station. Food, shipping, transportation and many other goods and services that utilize fuel for production and delivery have had significant increases. Investing in oil and gas stocks, especially those that are projected to grow significantly in the next year, presents an opportunity to take advantage of this trend. For our list, all of the oil and gas stocks listed below are earning strong profits and have projected EPS growth rates above 25%. Use the summaries below as a place to begin your own analysis.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for oil and gas stocks. We then screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(ROA [TTM]>10%). We then looked for businesses with projected high growth, measured by 1-year projected EPS growth above 25%. We did not screen out any market caps.
Do you think these stocks have a positive future in store? Use our list to help with your own analysis.
1) Callon Petroleum Co. (CPE)
| Sector | Basic Materials |
| Industry | Independent Oil & Gas |
| Market Cap | $233.39M |
| Beta | 2.48 |
Key Metrics
| Net Margin | 69.87% |
| Return on Assets | 25.13% |
| 1-Year Projected Earnings Per Share Growth Rate | 437.50% |
| Short Interest | 3.74% |
Callon Petroleum Company engages in the acquisition, exploration, development, and production of crude oil and natural gas properties. The company's properties are located in the Permian Basin in west Texas; the Haynesville Shale in northern Louisiana; and the Gulf of Mexico. As of December 31, 2011, its estimated net proved reserves totaled 15.9 million barrel of oil equivalent, including 10.1 million barrels of oil and 35.1 billion cubic feet of natural gas. The company was founded in 1950 and is headquartered in Natchez, Mississippi.
2) Continental Resources Inc. (CLR)
| Sector | Basic Materials |
| Industry | Independent Oil & Gas |
| Market Cap | $13.71B |
| Beta | 1.73 |
Key Metrics
| Net Margin | 32.29% |
| Return on Assets | 13.47% |
| 1-Year Projected Earnings Per Share Growth Rate | 36.71% |
| Short Interest | 8.59% |
Continental Resources, Inc. engages in the exploration, development and production of crude oil and natural gas primarily in the north, south and east regions of the United States. The company primarily sells its oil and natural gas production to end users, as well as to midstream marketing companies or oil refining companies at the lease. As of December 31, 2011, its estimated proved reserves were 508.4 million barrels of crude oil equivalent, with estimated proved developed reserves of 205.2 million barrels of crude oil equivalent. The company had interests in 3,255 wells and served as the operator of 2,082 of these wells. Continental Resources, Inc. was founded in 1967 and is headquartered in Enid, Oklahoma.
3) TransGlobe Energy Corp. (TGA)
| Sector | Basic Materials |
| Industry | Independent Oil & Gas |
| Market Cap | $823.90M |
| Beta | 1.29 |
Key Metrics
| Net Margin | 34.49% |
| Return on Assets | 18.76% |
| 1-Year Projected Earnings Per Share Growth Rate | 30.40% |
| Short Interest | 0.43% |
TransGlobe Energy Corporation operates as an exploration and production company with oil interests in the Arab Republic of Egypt and the Republic of Yemen. It has interests in 9 international blocks comprising 5.5 million acres. The company was formerly known as Dusty Mac Mines, Ltd. and changed its name to TransGlobe Energy Corporation in April 1996 as a result of its business focus shift from mineral exploration and extraction to oil and gas business. TransGlobe Energy Corporation was founded in 1968 and is headquartered in Calgary, Canada.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/08/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
