Whiting Petroleum Corporation (NYSE:WLL), a US$2.05B mid-cap, operates in the oil and gas industry which has endured a prolonged oil price downturn since 2014. However, energy-sector analysts are forecasting for the entire industry, a fairly unexciting growth rate of 8.32% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Should your portfolio be overweight in the oil and gas sector at the moment? Today, I will analyse the industry outlook, as well as evaluate whether Whiting Petroleum is lagging or leading its competitors in the industry. Check out our latest analysis for Whiting Petroleum
What’s the catalyst for Whiting Petroleum’s sector growth?
Much of the oil and gas industry has survived an especially tough few years with weak demand and low prices. Large energy businesses have slashed their growth expenditures by over 40% since the collapse, and reduced headcount by nearly half a million workers. Only now has the sector begun to emerge from its turmoil, and in the previous year, the industry saw growth in the twenties, beating the US market growth of 10.11%. Whiting Petroleum leads the pack with its impressive earnings growth of 35.82% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Whiting Petroleum poised to deliver a 92.11% growth over the next couple of years compared to the industry’s 8.32%. This growth may make Whiting Petroleum a more expensive stock relative to its peers.
Is Whiting Petroleum and the sector relatively cheap?
The oil and gas industry is trading at a PE ratio of 13.12x, below the broader US stock market PE of 18.8x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.31% on equities compared to the market’s 10.38%, potentially illustrative of a turnaround. Since Whiting Petroleum’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Whiting Petroleum’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Whiting Petroleum’s industry-beating future is a positive for investors. If Whiting Petroleum has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the energy industry. However, before you make a decision on the stock, I suggest you look at Whiting Petroleum’s fundamentals in order to build a holistic investment thesis.
- 1. 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.
- 2. Historical Track Record: What has WLL’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.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Whiting Petroleum? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!