Calgary, Canada-based Gran Tierra Energy Inc. (GTE) explores for and produces oil and gas in Colombia and Ecuador. GTE shares have gained 191% in price over the past six months and 71.3% over the past month to close yesterday’s trading session at $1.42. The stock has gained 86.6% year-to-date. Also, Wall Street analysts see a 9.9% potential upside in the stock.

The stock has been surging, driven by the bullish investor sentiment surrounding the sector. And the current oil rally is showing no sign of slowing down amid solid demand and escalating geopolitical tensions.

Oil prices crossed the $100 mark yesterday, with Brent crude reaching $104.99 per barrel, while the price of WTI crude oil hit $100 before falling back to $99.52, as Russia executed a “special military operation” in Ukraine.

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

Higher-Than-Industry Profit Margins

GTE’s 69.68% and 8.97% respective gross profit margin and net income margin are 69.5% and 148.4% higher than the 41.12% and 3.61% industry averages. Also, its 15.27% levered FCF margin is 63.1% higher than the 9.36% industry average.

Furthermore, GTE’s 15.20%, 3.57%, and 6.60% respective ROE, ROA, and ROTC are 139.5%, 72.4%, and 69.3% higher than the industry averages.

Discounted Valuation

In terms of forward P/E, GTE is currently trading at 4.06x, which is 64.8% lower than the 11.51x industry average. And its 1.94 and 2.59 respective forward EV/Sales and EV/EBITDA ratio are 23.2% and 63.2% lower than the industry averages. GTE’s 0.91x and 1.35x respective forward Price/Sales and Price/Cash Flow compare with the 1.49x and 5.33x industry averages.

Impressive Growth in 2021

For the year ended Dec. 31, 2021, GTE generated $42.48 million in net income, reflecting a substantial increase from its negative $777.97 million year-ago value. Its  net income was the highest it has achieved since 2018. Also, its EPS increased 105.7% year-over-year to $0.12. GTE’s oil sales rose 99.2% year-over-year to $473.72 million. And its adjusted EBITDA came in at $241.54 million, its highest level since 2019, indicating an increase of 150.3% from the prior year. Furthermore, GTE’s funds flow from operations grew 312.5% year-over-year to $186.49 million, its highest since 2019. In addition, its 2021 production stood at 26,507 BOPD, up 17% from 2020, while its total current average production was approximately 30,000 BOPD. The increase in production was attributed to successful drilling and workover campaigns in the Acordionero and Costayaco oil fields, combined with ongoing waterflood optimization throughout the company’s portfolio.

POWR Ratings Show Promise

GTE has an overall A rating, which translates to Strong Buy 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 B grade for Quality, which is consistent with its higher-than-industry profit margins.

GTE has an A grade for Momentum. This is justified because the stock is currently trading above its 50-day and 200-day moving averages.

Among  the 46 stocks in the A-rated Foreign Oil & Gas industry, GTE is ranked #10.

Beyond what I have stated above, one can view GTE’s grades for Value, Sentiment, Stability, and Growth here.

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

Bottom Line

The company saw solid operational growth last year. And the Street expects GTE’s revenues to increase 21.4% year-over-year in the current year, while its EPS is expected to increase 191.7%. Also, with analysts expecting oil prices to even hit the $150 per barrel mark, GTE should benefit. Thus, given the bullish sentiments, I think GTE could be an ideal investment now.

How Does Gran Tierra Energy Inc. (GTE) Stack Up Against its Peers?

GTE has an overall POWR Rating of A. However, one could also check out these other stocks within the Foreign Oil & Gas industry with the same rating: LUKOIL PJSC (LUKOY), TransGlobe Energy Corp. (TGA), and GeoPark Ltd. (GPRK).

Note that TGA is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

GTE shares were trading at $1.42 per share on Friday morning, down $0.00 (0.00%). Year-to-date, GTE has gained 86.57%, versus a -9.45% 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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