Earnings

Critical Comparison: Camber Energy, Inc. (CEI) vs. Northern Oil and Gas, Inc. (NOG)

Camber Energy, Inc. (NYSE:CEI) shares are down more than -82.30% this year and recently increased 10.69% or $0.02 to settle at $0.22. Northern Oil and Gas, Inc. (NYSE:NOG), on the other hand, is down -57.09% year to date as of 11/13/2017. It currently trades at $1.18 and has returned -11.94% during the past week.

Camber Energy, Inc. (NYSE:CEI) and Northern Oil and Gas, Inc. (NYSE:NOG) are the two most active stocks in the Oil & Gas Drilling & Exploration industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Comparatively, NOG is expected to grow at a 5.00% annual rate. All else equal, NOG’s higher growth rate would imply a greater potential for capital appreciation.



Profitability and Returns

Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. EBITDA margin of 34.01% for Northern Oil and Gas, Inc. (NOG). CEI’s ROI is -245.80% while NOG has a ROI of -66.00%. The interpretation is that NOG’s business generates a higher return on investment than CEI’s.

Cash Flow 




The value of a stock is simply the present value of its future free cash flows. CEI’s free cash flow (“FCF”) per share for the trailing twelve months was -0.03. Comparatively, NOG’s free cash flow per share was +0.05. On a percent-of-sales basis, CEI’s free cash flow was -0.03% while NOG converted 0% of its revenues into cash flow. This means that, for a given level of sales, NOG is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. CEI has a current ratio of 0.00 compared to 0.20 for NOG. This means that NOG can more easily cover its most immediate liabilities over the next twelve months.

Valuation

CEI trades at a P/S of 2.28, compared to a P/S of 0.37 for NOG. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. CEI is currently priced at a -78% to its one-year price target of 1.00. Comparatively, NOG is -15.71% relative to its price target of 1.40. This suggests that CEI is the better investment over the next year.

Risk and Volatility

Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. CEI has a beta of 0.97 and NOG’s beta is 1.23. CEI’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. CEI has a short ratio of 0.88 compared to a short interest of 8.60 for NOG. This implies that the market is currently less bearish on the outlook for CEI.

Summary

Northern Oil and Gas, Inc. (NYSE:NOG) beats Camber Energy, Inc. (NYSE:CEI) on a total of 8 of the 13 factors compared between the two stocks. NOG , is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, WTI has better sentiment signals based on short interest.

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