Yahoo Finance SilverBow Resources Inc (NYSE:SBOW): How Much Growth Is Left In Oil & Gas?
SilverBow Resources Inc (NYSE:SBOW), a US$328.8m small-cap, operates in the oil and gas industry which has persevered through a continued decline in oil prices since mid-2014. However, Energy-sector analysts are forecasting for the entire industry, a strong double-digit growth of 20.2% in the upcoming year , and a massive growth of 67.9% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Should your portfolio be overweight in the oil and gas sector at the moment? Below, I will examine the sector growth prospects, and also determine whether SilverBow Resources is a laggard or leader relative to its energy sector peers.
See our latest analysis for SilverBow Resources
What’s the catalyst for SilverBow Resources’s sector growth?
The oil price collapse drove a negative 40% growth in the energy sector in the past five years. Only now has the sector begun turnaround, and in the past year, delivered growth in the twenties, beating the US market growth of 15.5%. SilverBow Resources leads the pack with its impressive earnings growth of 79.0% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with SilverBow Resources poised to deliver a 39.6% growth over the next couple of years compared to the industry’s 20.2%. This growth may make SilverBow Resources a more expensive stock relative to its peers.
Is SilverBow Resources and the sector relatively cheap?
The oil and gas industry is trading at a PE ratio of 12.52x, lower than the rest of the US stock market PE of 19.88x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Furthermore, the industry returned a higher 13.1% compared to the market’s 10.6%, potentially illustrative of a turnaround. On the stock-level, SilverBow Resources is trading at a lower PE ratio of 6.69x, making it cheaper than the average energy stock. In terms of returns, SilverBow Resources generated 23.5% in the past year, which is 10.4% over the energy sector.
Next Steps:
SilverBow Resources’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its energy peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. However, before you make a decision on the stock, I suggest you look at SilverBow Resources’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has SBOW’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SilverBow Resources? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
