PDC Energy (NASDAQ:PDCE)

CAPS Rating: 3 out of 5

An independent energy company engaged primarily in the development, production and marketing of natural gas and oil.

Recs

5
Player Avatar BetapegAnalytics (< 20) Submitted: 8/24/2009 8:06:35 PM : Outperform Start Price: $13.15 PDCE Score: +237.78

The Petroleum Development Corporation (PETD) has had stellar growth over the last 5 years. Sales and profits have increased 231% and 403% respectively. The PE, PS, and PB ratios indicate PETD to be substantially undervalued. PETD is valued at $35.30 for FY2009. With a current price of $13.30, PETD is 171% undervalued for the fiscal year. The Company has an incredibly high earnings yield and profit margin of 66% and 20% respectively. Current profit levels would enable PETD to pay off all long-term debt within 4 years on profit alone. PETD lost $33.1 million in the second quarter 2009 due to losses from hedging contracts. This is less than the $40.7 million lost in year earlier quarter. The Company’s beta of 2.2 indicates the stock to be substantially volatile routinely performing double the market average on both up and down sides. The stock can be expected to remain flat or go lower short term. PETD spends 60% less on finding & research (F&D) than its industry peer group and maintains a $375 million credit line from 13 lenders. Risks include local environmental regulations, Federal regulations, operating hazards with insurance costs, competition, global economic risks, market volatility, concentration of regional operations (Rocky Mountains), decline in production, failure of drilling prospects, high capital expenditures, weather conditions, geopolitical risks, litigation, and debt risks.

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