Adams Resources & Energy, Inc. (AE) engages in crude oil marketing, transportation, and storage, tank truck transportation of liquid chemicals, pressurized gases, asphalt, and dry bulk through its subsidiaries, GulfMark Energy, Inc., Service Transport Company, Victoria Express Pipeline, LLC, and GulfMark Terminals. The company is headquartered in Houston, Tex.
In its last quarter, the company reported impressive financial performance results fueled by improving macro environment conditions. In addition, AE's crude oil pipeline and storage business, which was created following the acquisition of the Victoria Express Pipeline System in October 2020, increased its scope of operations in its last quarter.
Its shares have surged 21.3% in price year-to-date and 9.9% over the past month to close yesterday's trading session at $33.74.
Here is what could shape AE's performance in the near term:
Industry Tailwind
Oil and natural gas prices have been soaring lately on fears over the Russia-Ukraine war. The U.S. benchmark crude is up 42% this year and could soar further given the U.S. sanctions on Russia. While consumers are hurt from the rising prices, the oil industry and producers are benefitting from it.
Robust Financials
During the fourth quarter, ended Dec. 31, 2021, AE's total revenue increased 158.2% year-over-year to $644.79 million. Its operating income came in at $3.67 million. The company reported $2.83 million in net income, while its EPS amounted to $0.64 over this period. In addition, its cash and cash equivalents increased 148.9% for the year ended December 31, 2021, to $97.83 million.
Impressive Growth Prospects
The Street expects AE's revenues and EPS to rise 13.7% and 5.1%, respectively, year-over-year to $2.3 billion and $2.89 in its fiscal year 2022. In addition, AE's revenue is expected to rise by 75% in the current quarter (ending March 2022).
Discounted Valuation
In terms of trailing-12-months Price/Sales, the stock is currently trading at 0.07x, which is 95.9% lower than the1.79x industry average. Also, its 0.04x trailing-12-months EV/Sales is 98.7% lower than the 2.76x industry average. Furthermore, AE's 0.94x forward Price/Book is 52.6% lower than the 1.98x industry average.
POWR Ratings Reflect Solid Prospects
AE has an overall B grade, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. AE has a B grade for Quality, Growth, and Value. AE's solid earnings and revenue growth potential is consistent with the Quality and Growth grade. In addition, the company's lower-than-industry multiples are in sync with the Value grade.
Among the 93 stocks in the C-rated Energy – Oil & Gas industry, AE is ranked #4.
Beyond what I stated above, we have graded AE for Sentiment, Stability, and Momentum. Get all AE ratings here.
Bottom Line
AE's revenues increased in the fourth quarter, and it raised its outlook for the coming quarters, citing improving macroeconomic conditions. Furthermore, the current industry tailwinds and analysts; projections for the forthcoming quarters should further propel its price performance. So, we think the stock could be a great bet now.
How Does Adam Resources & Energy Inc. (AE) Stack Up Against its Peers?
AE has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: Weatherford International PLC (WFRD), and B (Buy) ratings: California Resources Corporation (CRC) and Baytex Energy Corp. (BTEGF).
AE shares were unchanged in premarket trading Tuesday. Year-to-date, AE has gained 22.20%, versus a -12.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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