New Concept Energy, Inc. (GBR) in Dallas Tex., began focusing on energy resource development in 2003, and today it is a fully integrated producer of oil and gas. The company focuses mainly on North American oil and gas drilling and exploration projects, with current properties concentrated in the Appalachian and Utica Basins.

Shares of GBR have slumped 39.3% in price over the past year. However, the stock has been surging in price amid escalating geopolitical tensions that have driven oil prices to near 14-year highs. The stock has gained 47.5% year-to-date to close yesterday’s trading session at $3.51. 

But the oil market has been witnessing heightened volatility of late, with oil prices declining by the largest degree since November last week . Furthermore, continuing the downward trend, oil prices plunged to a two-week low on Tuesday on ceasefire talks between Russia and Ukraine and fears about slower demand in China due to a surge in COVID-19 cases that have caused a reintroduction of lockdowns. GBR’s shares have retreated 7% in price over the past five days.

Here is what could shape GBR’s performance in the near term:

Bleak Financial Profile

For its fiscal third quarter, ended September 30, 2021, GBR’s operating loss came in at $62,000, representing a 12.7% increase year-over-year. Also, its earnings from continuing operations came in at a negative $8,000, reflecting a substantial decline from its year-ago value of $82,000.Its EPS has declined 97.7% year-over-year to $0.01. In addition, its trailing-12-month EBITDA and levered FCF stood at negative $308,000 and $71,750, respectively.

Stretched Valuation

In terms of trailing-12-month P/E, GBR is currently trading at 238.37x, which is 1,536.3% higher than the 14.57x industry average. Also, its  respective 176.91 and 179.37 trailing-12-month EV/Sales and Price/Sales ratio are 6,299% and 10,510.3% higher than the industry averages. And GBR’s 83.48x forward Price/Cash Flow  is 1,221.4% higher than the 6.32x industry average.

Poor Profitability

GBR’s 3.96% gross profit margin is 90.7% lower than the 42.47%  industry average. Also, its negative 71.04% levered FCF margin compares with the 8.28% industry average. And  GBR’s ROE and ROA of 1.73% and 1.94%, respectively, are 80.6% and 33.5% lower than the 8.90% and 2.92% industry average, while its  negative 4.64% ROTC  compares with the 4.42% industry average.

Unfavorable POWR Ratings

GBR has an overall rating of D, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a D grade for Growth, consistent with its declining financials in its last reported quarter.

GRB has a D grade for Value. Its stretched valuations justify this grade.

Among  the 87 stocks in the Energy – Oil & Gas industry, GBR is ranked #85.

Beyond what I have stated above, one  can also view GBR’s grades for Sentiments, Quality, Momentum, and Stability here.

View the top-rated stocks in the Energy – Oil & Gas industry here.

Bottom Line

GBR stock gained significantly in price this year due to the surging oil and gas prices. However, the oil price momentum appears  to have slowed over the past week as Russia and Ukraine hold multiple talks to end the war. Furthermore,  considering GBR’s weak fundamentals, we think it could be best to avoid the stock now.

How Does New Concept Energy, Inc. (GBR) Stack Up Against its Peers?

While GBR has an overall POWR Rating of D, one might want to consider investing in the following Energy – Oil & Gas stocks with a B (Buy) rating: California Resources Corporation (CRC), Baytex Energy Corp. (BTEGF), and VAALCO Energy, Inc. (EGY).

GBR shares fell $0.05 (-1.42%) in premarket trading Tuesday. Year-to-date, GBR has gained 47.48%, versus a -12.20% 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. More...

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