Camber Energy vs. Cimarex Energy: Which Independent Oil & Gas Stock is a Better Buy?
OPEC+’s expectation of unprecedented oil demand should boost output in the coming months. Also, the benchmark Brent crude is currently trading above $...
OPEC+’s expectation of unprecedented oil demand should boost output in the coming months. Also, the benchmark Brent crude is currently trading above $72 per barrel, near its multi-year highs. Therefore, we think oil-producing companies Camber (CEI) and Cimarex (XEC) will likely benefit. But which of these stocks is a better buy now? Read more to find out.
Camber Energy, Inc. (CEI) in Houston, Tex., is an independent oil and natural gas company that acquires, develops, and sells crude oil, natural gas, and natural gas liquids. In comparison, Cimarex Energy Co. (XEC) in Denver, Colo., also operates as an independent oil and gas exploration and production company, primarily in Texas, Oklahoma, and New Mexico.
Despite the COVID-19 Delta variant concerns, OPEC+ expects global oil demand to witness a stable rise in the second half of 2021 and beyond. OPEC+ estimates global oil demand will grow by 5.95 million bpd in 2021. Also, the organization has revised its 2022 oil demand forecast to 4.2 million barrels per day (bpd) up from its previous forecast of 3.28 million bpd. Furthermore, the benchmark Brent crude is trading close to its multi-year highs on expectations of a rise in oil demand as the vaccine roll-out progresses and global economic vitality returns. The anticipated stable demand should allow oil & gas stocks CEI and XEC to generate substantial revenues in the coming quarters.
CEI has gained 36.3% in price over the past six months, while XEC has returned 22.8% over this period. However, XEC’s 107.3% gains year-to-date compare with CEI’s 83% returns. In terms of the past year’s performance, CEI is the clear winner with 232.8% gains versus XEC’s 196%.
But which stock is a better buy now? Let’s find out.
On August 9, CEI announced the acquisition of a majority interest in Simson-Maxwell Ltd. Simson-Maxwell is a leading manufacturer and supplier of industrial engines, power generation products, services, and custom energy solutions. CEI expects this acquisition to enhance its customized service offering and to expedite its growth strategy.
On August 31, XEC declared a $20.3125 per share dividend on its 8⅛% Series A cumulative perpetual convertible preferred stock. The dividend is payable on October 15, 2021.
Recent Financial Results
CEI’s total revenues declined 38.1% year-over-year to $57,458 in its fiscal second quarter, ended September 30, 2020. Its operating loss stood at $827,642, reflecting a 20.7% decline year-over-year. The company’s net loss per share decreased 95.7% year-over-year to $0.19.
XEC’s revenues increased 185.7% year-over-year to $712.38 million in its fiscal second quarter, ended June 30. Its operating income grew 113.5% from its year-ago value to $159.91 million, while its net income improved 112.3% year-over-year to $113.39 million. The company’s EPS increased 111.9% year-over-year to $1.10.
Past and Expected Financial Performance
CEI’s revenues and total assets decreased at CAGRs of 67% and 30.1%, respectively, over the past three years.
In comparison, XEC’s revenues grew at a 0.7% CAGR over the past three years, while its total assets decreased at a 2% CAGR over this period. Analysts expect the company’s revenue to increase 92.7% in the current quarter and 77.3% in the current year. The company’s EPS is expected to grow 421.6% in the current quarter and 591.4% in the current year.
XEC is more profitable with gross profit and EBITDA margins of 78.91% and 42.41%, respectively, versus CEI’s negative 0.47% and 1,524.01%.
Furthermore, XEC’s ROA and ROTC of 5.04% and 6.28%, respectively, compare with CEI’s negative 12.20% and 13.79%.
Thus, XEC is more profitable compared to CEI.
In terms of trailing-12-months EV/Sales, CEI is currently trading at 660.11x, which is 99.4% higher than XEC, which is currently trading at 4.20x. Also, CEI’s 54.45 trailing-12-months Price/Sales ratio is 93.5% higher than XEC’s 3.56.
Thus, XEC is relatively affordable here.
XEC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In contrast, CEI has an overall F rating, which translates to Strong Sell. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
XEC has a grade of A for Quality. This is justified because XEC’s 0.43% asset turnover ratio is 19.3% higher than the 0.36% industry average. In comparison, CEI has an F grade for Quality, which is justified because CEI’s 0.01% asset turnover ratio is 96.5% lower than the industry average.
XEC has a B grade for Growth, consistent with its stable rise in financials in the latest quarter. CEI has a growth grade of C, consistent with the company’s mixed financial performance.
Among the 93 stocks in the Energy - Oil & Gas industry, XEC is ranked #15, while CEI is ranked last.
Given OPEC+’s expectations of a rise in oil demand in the coming months, oil-producing companies with sound fundamentals should benefit. However, XEC’s higher profitability, lower valuation, and stable financials make it the better Buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Energy - Oil & Gas industry here.
XEC shares were trading at $75.41 per share on Tuesday morning, down $2.00 (-2.58%). Year-to-date, XEC has gained 103.53%, versus a 17.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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