Riley Exploration Permian has had an impressive run over the past six months as its shares have beaten the S&P 500 by 23.4%. The stock now trades at $36.04, marking a 31.2% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy REPX? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is REPX a Good Business?
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. Thankfully, Riley Exploration Permian’s 36.6% annualized revenue growth over the last five years was incredible. Its growth beat 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
While energy gross margins can be distorted by commodity prices, hedging, and short-term cost swings, sustained margins across a full cycle reflect a producer’s underlying asset quality, infrastructure position, and cost structure.
Riley Exploration Permian, which averaged 76.6% 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
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
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 17.3% 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 topping the market in recent months, the stock trades at 5.1× forward P/E (or $36.04 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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