Ring Energy (REI), a pure play Permian-focused E&P (exploration and production) company, is in third place among upstream companies in terms of analysts’ ratings. All the analysts covering the stock rate it a “buy” as of September 4. B. Riley last initiated coverage on REI with a “buy” rating. That’s the only rating update REI has seen so far in 2018.
REI is currently trading below the low range ($14) of analysts’ target price. Its average target price of $18.70 offers a 65% upside from its current price.
Strong earnings growth potential
Ring Energy has seen strong earnings growth in the recent quarter. It posted EPS of $0.18 in the first six months of 2018 compared to $0.06 in the same period last year. For 2018, analysts expect the company to post EPS of $0.50 compared to an EPS loss of $0.08 in 2017. Earnings growth is expected to be ~142% and ~77% in 2018 and 2019, respectively. for the same years, it’s expected to post CFFO (cash flow from operations) growth of 89% and 62%, respectively.
The company’s strong earnings growth and debt-free balance sheet could be the major reasons behind analysts’ bullishness. However, its high valuation might be a slight concern. The company is currently trading at a forward price-to-CFFO ratio of 8.5x. That’s above the industry median of 5.4x.
In the next part, we’ll look at analysts’ ratings for WPX Energy (WPX).