Carrizo Oil & Gas (CRZO, Financial) is showing steady improvement in its performance on a year-over-year basis, and the same was evident in its fourth-quarter results. We cannot expect a sudden turnaround, but its progress is clearly evident from its share price, which has risen considerably since December 2014. But the decisive factor going forward will be the direction of oil prices; unlike some of its peers, if the crude becomes favorable, Carrizo’s stocks could touch its former glory in the days ahead.
Strong growth
During the quarter its revenue marked another year-over-year increase, growing 24% to $163.3 million, while earnings adjusted for non recurring gains fell to 32 cents a share compared to 38 cents last year. As seen from the numbers, the depressing crude market continued to weigh on its profits. Considering the present situation, it is quite difficult to say any affirmative statement regarding the future price movement.
However, if prices do stabilize, then Carrizo seems to be on the right track to yield good returns for its investors. As a matter of fact even at current price levels, the company is generating a good return from the Eagle Ford shale.
Moreover, its stock had a good rally in the past two years touching its all-time high in June 2014, which is quite encouraging. Interestingly, during this oil decline, the stocks of many of its peers sunk to their all-time lows. But Carrizo bounced back after falling around 42%, reflecting its resilience in the midst of challenging times. Its future course would definitely be dependent on macroeconomic factors, but if all the factors fall in line, the company seems poised to retain its former glory. In the light of these factors Carrizo looks to be a good long term bet.
Conclusion
Going forward, Carrizo seems to be in a good position fundamentally, and its stocks reflect the same strength. There might be some headwinds in the near future since a forward P/E of 41.47 compared to the trailing P/E of 9.82 reflects that its earnings might reduce. However, the company has a strong asset base, with which it will be able to overcome these short-term challenges.
