Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
popular exchange traded fund Power Shares S&P Smallcap Energy (PSCE: Nasdaq)
holds a number of energy-related companies involved in oil and gas exploration,
drilling, production, distribution and servicing.The deciding factor is the S&P Small-cap
600 Capped Energy Index that is adjusted according to float and market
capitalization.That puts Stone Energy (SGY:NYSE) in the position of tenth largest holding in
PSCE.Four percent of the fund’s assets are
held as SGY common stock.
Energy is an independent oil and natural gas company that acquires, explores,
and develops oil and gas properties.The
company has been operating in the Gulf of Mexico for a couple of decades but beginning
in 2006 expanded its reach with onshore oil and gas shale operations in the Marcellus
Share in Appalachia.By the end of 2012 the
company controlled reserves with 773 billion cubic feet of gas equivalent. Deep water properties in the Gulf of Mexico
account for about 34% of total estimated oil and natural gas reserves, while
Appalachian properties account for 44%.
the twelve months ending March 2013, Stone Energy delivered $136.3 million in
net income or $2.81 per share from $933.4 million in total sales.That is a net margin of 14.6%, well above the
2.5% average for the oil and gas industry.What is even more impressive is Stone Energy’s success in converting
sales to cash.In that same twelve
months operating cash flows totaled $537.6 million, or 57.6% of sales.
the cash gets put to good use as investment in new properties and improvements
as well as pay down of debt. Stone
Energy invested $610.4 million in its oil and gas properties over the past
twelve months.After paying for these
investments and paying interest and principal obligations, levered free cash
flow in that twelve month period was a negative $121.4 million.
impressive as these financial details might be, Stone Energy’s place in the
S&P Small-cap 600 Capped Energy Index is based only on market
capitalization.SGY was added to the
index in February 1999.Thus SGY has
been a part of the Power Shares ETF from its inception.
has its detractors.Short interest increased
over the past several months, rising to 11.1% of SGY flotation.That has not discouraged the analysts with
published estimates.The consensus
earnings estimate for the year 2013 is $2.84 per share on $916.6 million in
total sales, representing flat performance compared to the last year.Earnings expectations for the next year are
modest-$2.03 in earnings per share on $884.3 million in sales.The mean rating for SGY shares is
bullish.The consensus price target is
$34.00, representing a potential gain of 55% from the current price level.A review of historic trading patterns
suggests the stock has sufficient momentum built up to achieve a price level
near $37.50 per share.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies