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Why Vaalco Energy (EGY) Is Up Today

Stocks in this article: EGY

NEW YORK (TheStreet) -- Shares of Vaalco Energy (EGY) rose 17.2% on Friday after fourth-quarter earnings improved from a year earlier.

In the fourth quarter, Vaalco reported net income of $26.4 million, a reversal from a year-earlier loss of $18.9 million. For the year, Vaalco reported net income of $43.1 million, or 74 cents a share.

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The company's offshore oil wells in Gabon continue to be Vaalco's top money maker, with crude oil revenue coming in at $58 million in fourth quarter compared with $53 million in the same period of 2012. The company is slated to build two more production platforms in the region. Each platform is expected to drill multiple wells.

TheStreet Ratings team rates VAALCO ENERGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation:

"We rate VAALCO ENERGY INC (EGY) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • EGY's revenue growth has slightly outpaced the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EGY has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.93, which clearly demonstrates the ability to cover short-term cash needs.
  • VAALCO ENERGY INC has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VAALCO ENERGY INC reported lower earnings of $0.01 versus $0.58 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.01).
  • This stock's share value has moved by only 15.24% over the past year. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VAALCO ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: EGY Ratings Report
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