Aumake International Limited (ASX:AU8), a AUD$40.61M small-cap, is an oil and gas company operating in an industry which has seen a prolonged oil price downturn since mid-2014. However, energy-sector analysts are forecasting for the entire industry, the bottom line growth to double in the upcoming year, and a whopping triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Australian stock market as a whole. Is now the right time to pick up some shares in oil and gas companies? In this article, I’ll take you through the energy sector growth expectations, as well as evaluate whether AU8 is lagging or leading its competitors in the industry. See our latest analysis for AU8

What’s the catalyst for AU8'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. Only now has the sector begun to emerge from its turmoil, and over the past year, the industry turnaround led to growth in the forties, beating the Australian market growth of -4.59%. AU8 lags the pack with its negative growth rate of -100.10% over the past year, which indicates the company has been growing at a slower pace than its energy peers. As the company trails the rest of the industry in terms of growth, AU8 may also be a cheaper stock relative to its peers.

Is AU8 and the sector relatively cheap?

The oil and gas industry is trading at a PE ratio of 58x, higher than the rest of the Australian stock market PE of 16x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 2.18% compared to the market’s 11.92%, illustrative of the recent sector upheaval. Since AU8’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge AU8’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? AU8 has been an oil and gas industry laggard in the past year. If your initial investment thesis is around the growth prospects of AU8, there are other oil and gas companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how AU8 fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If AU8 has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its oil and gas peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at AU8’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Aumake International'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.