Is Kodiak a good buy at $9

kodiak oil & gas logoIncomeHunter over at Seeking Alpha certainly thinks so. Kodiak closed at $9.29 today, up from the recent low of $7.08 back on June 21st. That’s quite a run in less than three months, not to mention from the 52 week low of $3.59.

Recent expansion of the rail capacity needed to ship oil from the Bakken is certainly good news, and greatly reduces risk to the company due to price disparities that result from the inability to get their oil to market.

IncomeHunter’s fundamental analysis is as follows:

Kodiak has a market cap of just under $2.5 billion. Although its P/E ratio stands a bit high at 24.83, the shares show a modest EPS of $0.36. Although the company does not currently pay a dividend, investors may very well profit from share growth on this potential up-and-comer.

In fact, this one could be rated as a great value play. The company’s share value more than doubled between October 2011 and late February 2012, before pulling back again in the spring. And, with a potential bottoming-out in the summer of 2012, the shares have been pushing higher ever since.

With Kodiak’s second quarter 2012 net income of over $93 billion, or $0.35 per share, its numbers have surged in comparison to $14 million, or $0.08 per share, just one year prior. During this same time, Kodiak’s quarterly revenue rose to nearly $86 million. This is up from just over $22 million for the second quarter of 2011.

Kodiak has seen some wild swings in terms of share price over just the past year. With company management targeting 27,000 barrels of daily production by the end of 2012 – a number that is roughly double its recent production amount – there could be a somewhat bumpy ride ahead. However, that being said, the firm is expected to vastly increase revenue – from full-year 2012 of $469 million to full-year 2013 of $823 million – giving Kodiak a yearly sales growth of just over 291% and annual growth of earnings per share of 370%. With all of that, recent share price could truly be a bargain.

Kodiak’s revenue from Q2 2011 and Q2 this year went up nearly 400%, which is certainly impressive. From past reports, the main threat to the smaller players is declining oil prices, lack of shipping infrastructure, and over-leveraging.

The WTI index closed at $94.67 today, and has been steadily increasing since June. Obviously, a new economic shock could threaten that. Shipping infrastructure has improved dramatically, however, and that ought to lessen the risk of local bottlenecks significantly.

In any event, Kodiak has always been one of the more promising smaller players in the region, and could be a good bet to take a look at now. As always, this is not a recommendation or financial advice. Do your own due diligence before investing in any stocks.

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