Yahoo Finance Parex Resources Inc (TSE:PXT): Thriving Or Barely Surviving?
Parex Resources Inc (TSX:PXT), a CA$3.57B mid-cap, is an oil and gas company operating in an industry which has seen a prolonged oil price downturn since mid-2014. However, energy-sector analysts are forecasting for the entire industry, a highly optimistic growth of 34.13% in the upcoming year , and a whopping triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Canadian stock market as a whole. Is the oil and gas industry an attractive sector-play right now? In this article, I’ll take you through the energy sector growth expectations, as well as evaluate whether Parex Resources is lagging or leading its competitors in the industry. View our latest analysis for Parex Resources
What’s the catalyst for Parex Resources’s sector growth?
Much of the oil and gas industry has survived an especially tough few years with weak demand and low prices. Although profitability is always a key metric, in the oil and gas industry, growth in production and reserves has often been more important. However, recently the sector saw a reversal in the downturn, and in the previous year, the industry saw growth of over 50%, beating the Canadian market growth of 15.40%. Parex Resources leads the pack with its impressive earnings growth of over 100% last year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Parex Resources poised to deliver a 65.88% growth over the next couple of years compared to the industry’s 34.13%.
Is Parex Resources and the sector relatively cheap?
The energy sector’s PE is currently hovering around 19.99x, relatively similar to the rest of the Canadian stock market PE of 15.91x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 6.49% compared to the market’s 10.18%, illustrative of the recent sector upheaval. On the stock-level, Parex Resources is trading at a lower PE ratio of 14.6x, making it cheaper than the average oil and gas stock. In terms of returns, Parex Resources generated 19.42% in the past year, which is 12.92% over the oil and gas sector.
Next Steps:
Parex Resources’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its energy peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. However, before you make a decision on the stock, I suggest you look at Parex Resources’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has PXT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Parex Resources? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
