Riley Exploration Permian’s 36.8% return over the past six months has outpaced the S&P 500 by 32.9%, and its stock price has climbed to $35.79 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy REPX? Find out in our full research report, it’s free.
Why Are We Positive On Riley Exploration Permian?
Operating in counties where legacy oil fields have been producing since the early 1900s, Riley Exploration Permian (NYSE: REPX) drills for and produces oil and natural gas from horizontal wells in the Permian Basin of West Texas and New Mexico.
1. Skyrocketing Revenue Shows Strong Momentum
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Over the last five years, Riley Exploration Permian grew its sales at an incredible 40.4% compounded annual growth rate. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. Elite Gross Margin Powers Best-In-Class Business Model
In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.
Riley Exploration Permian, which averaged 77% gross margin over the last five years, exhibits enviable unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an advantaged starting point for ultimate operating profits and free cash flow generation.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Riley Exploration Permian has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 17.2% over the last five years, quite impressive for an upstream and integrated energy business.
Final Judgment
These are just a few reasons why we're bullish on Riley Exploration Permian, and with its shares beating the market recently, the stock trades at 6.6× forward P/E (or $35.79 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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