Camber Energy, Inc. (CEI) is a Houston, Tex.-based independent oil and natural gas company that acquires, develops, and sells crude oil, natural gas, and natural gas liquids in the Cline shale and upper Wolfberry shale Glasscock County, Texas. In comparison, SilverBow Resources, Inc. (SBOW). which is also a Houston-based oil and gas company, acquires and develops assets in the Eagle Ford shale located in South Texas.
Oil & gas prices have gained significantly in the first half of the year. Despite rising COVID-19 cases threatening oil demand, which led to a decline in prices for a short period, oil prices are on the rise. They climbed significantly last week due to the concerns over a supply crunch amid the steady demand. Also, natural gas prices are expected to continue to rise, especially during the winter months. Therefore, oil & gas companies CEI and SBOW should benefit.
SBOW has gained 165.2% in price over the past six months, while CEI has returned 17.8% over the period. Also, SBOW’s 322% gains year-to-date compare with CEI’s 64.6% returns. In terms of the past year’s performance, SBOW is the clear winner with 422.4% gains versus CEI’s 221.4%.
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 13, SBOW signed agreements to acquire oil and gas assets in the Eagle Ford. This acquisition should bolster SBOW’s position in the industry and improve its financials. As Sean Woolverton, the company’s Chief Executive Officer, noted, at the time, “Today’s announcement expands our gas portfolio in the Western Eagle Ford, while also adding oil acreage in three new counties. Each transaction is accretive to adjusted EBITDA and further reduces our pro forma leverage ratio via the assets’ incremental cash flow.”
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.
SBOW’s net sales increased 181.2% year-over-year to $69.86 million in its fiscal second quarter ended June 30. Its operating income grew 112.6% from its year-ago value to $33.54 million. The company’s adjusted EBITDA improved 64.7% year-over-year to $42.79 million.
Past and Expected Financial Performance
CEI’s revenues and total assets have decreased at CAGRs of 67% and 30.1% over the past three years, respectively.
In comparison, SBOW’s revenues and total assets grew at CAGRs of 6.5% and 1.4%, respectively, over the past three years. Analysts expect the company’s revenue to increase 47.8% in the next quarter and 70.3% in the current year. The company’s EPS is expected to grow 85.6% in the next quarter and 49.5% in the current year. Furthermore, SBOW’s EPS is expected to grow at a 5% rate per annum over the next five years.
SBOW is more profitable, with an 85.50% gross profit margin, versus CEI’s negative 0.47%.
Furthermore, SBOW’s ROE, ROA, and ROTC of 11.60%, 4.08%, and 4.66%, respectively, compare with CEI’s negative 29.42%, 12.20%, and 13.79%.
Thus, SBOW is more profitable here.
In terms of trailing-12-months Price/Sales, CEI is currently trading at 48.97x, which is 97.9% higher than SBOW, which is currently trading at 1.05x. Also, CEI’s 595.50 trailing-12-months EV/Sales ratio is 99.5% higher than SBOW’s 2.71.
Thus, SBOW is a relatively affordable stock here.
SBOW has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. In comparison, CEI has an overall F rating, which translates to Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
SBOW has a B grade for Value, while CEI has a Value grade of F. SBOW’s 1.05 trailing-12-month Price/Sales ratio is 23.3% lower than the 1.37 industry average, which is in sync with its Value grade. In contrast, CEI’s 48.97 trailing-12-months Price/Sales multiple is 3,465.1% higher than its industry average, consistent with its grade.
SBOW has an A grade for Growth, which is consistent with its stable rise in financials over the past couple of years. In comparison, CEI has a growth grade of C, consistent with the company’s mixed financial performance.
Of the 92 stocks in the Energy – Oil & Gas industry, SBOW is ranked #1, while CEI is ranked last.
Both SBOW and CEI are expected to benefit from the rising oil & gas prices. However, higher profit margins and stable financials make SBOW a better investment compared to CEI.
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.
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SBOW shares rose $0.02 (+0.09%) in after-hours trading Monday. Year-to-date, SBOW has gained 314.12%, versus a 20.23% 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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