VAALCO Energy, Inc. (EGY) in Houston, Tex., is an independent energy company that acquires, explores for, develops, and produces crude oil and natural gas. It holds an Etame production sharing contract related to the Etame Marin block located offshore in the Republic of Gabon in West Africa. Camber Energy, Inc. (CEI), which is also based in Houston, is an 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 in Glasscock County, Texas.
Oil prices fell sharply following OPEC and its allies’ agreement on July 18 to increase production by 400,000 barrels each month beginning in August. Rising COVID-19 cases due to the spread of the hyper-contagious Delta variant also contributed to the decline in oil prices. However, the slump in oil prices should be considered a buying opportunity, according to Andy Lipow, the president of Lipow Oil Associates. The world is still largely dependent on plentiful supplies of fuel, such as oil and gas. So, both EGY and CEI could benefit from the steady demand.
EGY has gained 33.3% year-to-date, while CEI lost 48.2%. Also, EGY’s 105.2% gain over the past year is significantly higher than CEI’s 47.5% loss. Furthermore, in terms of their past nine months’ performance, EGY is the clear winner with 144.4% gains versus CEI’s 41.4% loss.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On May 11, 2021, EGY entered crude oil commodity swap agreements for a total of 672,533 barrels at a Dated Brent weighted average price of $66.51 per barrel for the period from and including May 2021 through October 2021. George Maxwell, the company’s CEO, said, “We have locked in strong free cash flow over the next six months by capitalizing on the continued strength in crude oil prices.”
CEI reported on May 21, 2021, that the NYSE American exchange notified that the company was not in compliance with the exchange's continued listing standards because it failed to timely file its Form 10-K for the nine months ended December 31, 2020.
Past Financial Performance
EGY’s revenue and total assets grew at CAGRs of 2% and 24.3%, respectively, over the past three years. In comparison, CEI’s revenue and total assets fell at CAGRs of 67% and 30.1%, respectively, over the same period.
Profitability
EGY’s $88.56 million trailing-12-month revenue is significantly higher than CEI’s $274.160. Also, EGY is more profitable, with a gross profit margin and net income margin of 51.50% and 16.36%, respectively, compared to CEI’s negative values.
Furthermore, EGY’s ROE, ROA, and ROTC of 22.72%, 2.33%, and 4.53%, respectively, compares with CEI’s negative values.
Valuation
In terms of trailing-12-month P/S, CEI is currently trading at 15.41x, which is 907.2% higher than EGY’s 1.53x. Furthermore, CEI’s 208.99x trailing-12-month EV/S is 12,643.3% higher than EGY’s 1.64x.
So, EGY is the more affordable stock.
POWR Ratings
EGY has an overall B rating, which equates to 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 by considering 118 different factors, with each factor weighted to an optimal degree.
EGY has a B grade for Growth, consistent with its impressive growth performance over the past few years. However, CEI has a C grade for Growth, in keeping with its revenue decline over the past three years.
EGY also has a grade of B for Quality. This is justified given EGY's 0.51% trailing-12-month asset turnover ratio, which is 59.8% higher than the 0.32% industry average. CEI, in contrast , has an F Quality grade, which is consistent with its 0.01% trailing-12-month asset turnover ratio, which is 96% lower than the 0.32% industry average. Also, EGY has an A grade for Sentiment, which is in sync with favorable analyst sentiment, while CEI has a D grade for Sentiment, consistent with unfavorable analyst sentiment.
Of the 93 stocks in the Energy - Oil & Gas industry, EGY is ranked #4 while CEI is ranked last.
Beyond what we’ve stated above, we have also rated both the stocks for Stability, Momentum, and Value. Click here to view all the EGY Ratings. Also, get all the CEI ratings here.
The Winner
Even though OPEC+ recently reached a deal to increase oil production, oil demand is expected to remain high with the continued reopening of the economy. Against this backdrop, we think it could be wise to bet on EGY given its lower valuation and higher profitability.
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.
EGY shares were trading at $2.44 per share on Tuesday afternoon, up $0.08 (+3.39%). Year-to-date, EGY has gained 37.85%, versus a 16.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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