What’s Ahead For Kingsland Energy Corp (TSXV:KLEH)?

Kingsland Energy Corp (TSXV:KLE.H), a CADCA$1.51M small-cap, is an oil and gas company operating in an industry which has endured a continued decline in oil prices since 2014. However, energy-sector analysts are forecasting for the entire industry, a positive double-digit growth of 24.12% in the upcoming year , and an enormous triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Canadian stock market as a whole. Is now the right time to pick up some shares in oil and gas companies? Below, I will examine the sector growth prospects, as well as evaluate whether KLE.H is lagging or leading its competitors in the industry. Check out our latest analysis for Kingsland Energy

What’s the catalyst for KLE.H’s sector growth?

The oil and gas sector has been negative 40% in the past five years, due to the oil price crash. Global oil and gas companies cut capital expenditures by about 40% during 2014 and 2016, and as part of this cost cutting initiative, some 400,000 workers were let go, with major projects cancelled or deferred. Over the past year, the industry saw negative growth of -0.30%, underperforming the Canadian market growth of 8.26%. KLE.H lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means KLE.H may be trading cheaper than its peers.

Is KLE.H and the sector relatively cheap?

The oil and gas industry is trading at a PE ratio of 23x, higher than the rest of the Canadian stock market PE of 17x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 6.96% compared to the market’s 9.62%, illustrative of the recent sector upheaval. Since KLE.H’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge KLE.H’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? KLE.H recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto KLE.H as part of your portfolio. However, if you’re relatively concentrated in oil and gas, you may want to value KLE.H based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If KLE.H has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the oil and gas industry. Before you make a decision on the stock, take a look at KLE.H’s cash flows and assess whether the stock is trading at a fair price.

For a deeper dive into Kingsland Energy’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other energy stocks instead? Use our free playform to see my list of over 300 other oil and gas companies trading on the market.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.