Is Whiting Petroleum Corporation’s (NYSE:WLL) Stock Available For A Good Price After Accounting For Growth?

Looking at Whiting Petroleum Corporation’s (NYSE:WLL) fundamentals some investors are wondering if its last closing price of $23.46 represents a good value for money for this high growth stock. Below I will be talking through a basic metric which will help answer this question.

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See our latest analysis for Whiting Petroleum

Exciting times ahead?

One reason why investors are attracted to WLL is the high growth potential in the near future. The consensus forecast from 17 analysts is extremely positive with earnings per share estimated to rise from today’s level of $2.84 to $3.253 over the next three years. This results in an annual growth rate of 30%, on average, which illustrates a highly optimistic outlook in the near term.

Is WLL available at a good price after accounting for its growth?

Stocks like Whiting Petroleum, with a price-to-earnings (P/E) ratio of 8.26x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that WLL is undervalued relative to the current US market average of 17.74x , and undervalued based on its latest annual earnings update compared to the Oil and Gas average of 13.25x .

NYSE:WLL Price Estimation Relative to Market, May 22nd 2019
NYSE:WLL Price Estimation Relative to Market, May 22nd 2019

Given that WLL’s price-to-earnings of 8.26x lies below the industry average, this already indicates that the company could be potentially undervalued. But, to be able to properly assess the value of a high-growth stock such as Whiting Petroleum, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 8.26x and expected year-on-year earnings growth of 30% give Whiting Petroleum an extremely low PEG ratio of 0.27x. Based on this growth, Whiting Petroleum’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

WLL’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are WLL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has WLL been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of WLL’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.