HOUSTON (TheStreet) -- Carbo Ceramics' (CRR) - Get Report shares have jumped 38% since the end of October, when TheStreet profiled the energy company. The Russell 2000 Index, a barometer for small-cap stocks, has risen about half as much.

Investors ought to consider paring their holding of the natural-gas company. Carbo Ceramics' share price has come close to fair value and may not offer as much potential. Growth investors, however, should take note of the stock.

As concern over environmental pollution increases, natural-gas-fired power plants are replacing those that run on coal. As a result, natural-gas companies need to get at more deposits locked in shale, a complicated extraction process known as hydraulic fracturing, which breaks apart rock.

In hydraulic fracturing, a fluid is injected into the shale to break it apart. The fluid has a so-called proppant suspended in it to prevent the opening from collapsing in on itself. Here's where Carbo Ceramics comes in. Carbo produces the ceramic proppant beads used to maintain the openings. Not very glamorous, but it's a vitally important part of the process.

Carbo also produces widely used hydraulic fracturing simulation software and provides consulting services. Such a niche has proved to be profitable. Carbo's stock has risen 122% over the past 52 weeks and has a return on equity of nearly 13%, which may not seem high but, considering that the business is almost completely funded with equity, is impressive.

Zero debt on the balance sheet creates an ideal environment for equity holders. None of the profits are lost to debt servicing, and the company is able to grow from its own profit generation rather than bond issuance, which is getting more expensive. The stock pays a dividend yield of about 1%.

The jump in Carbo Ceramics' shares was more sudden than anticipated, thanks mainly to greater-than-expected third-quarter earnings and the announcement of a deal in which

Exxon Mobil

(XOM) - Get Report

would purchase

XTO Energy

( XTO), a natural-gas producer, effectively validating the natural-gas movement.

Consider Carbo to be more of a growth than a value bet. Profits will increase with a move to natural gas as production ramps up to meet demand. Analysts expect revenue growth of about 16% this year, followed by an acceleration to 20% in 2011. Since our initial recommendation, the price-to-earnings ratio has narrowed and is now only slightly below the industry average of 28.

-- Reported by David MacDougall in Boston.

Prior to joining TheStreet Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.