Independent oil and natural gas company Camber Energy, Inc. (CEI), which is headquartered in Houston, Tex., is focused on the acquisition, development, and sale of natural gas, crude oil, and natural gas liquids in the Cline shale and upper Wolfberry shale in Texas. CEI holds interests in active oil & gas properties in the onshore Gulf Coast region. Its shares have jumped 68.4% in price over the past five days due to heavy discussion about it on Reddit and Twitter and the consequent bullishness of retail investors. Of the company’s floating shares,14.3% have been sold short.

But CEI’s stock had declined 10.4% in price year-to-date and 40.5% over the past six months, reflecting investor concerns over the NYSE’s notification that the company did not comply with the Exchange's continued listing standards. Closing yesterday’s session at $0.83, the stock is trading 73.3% below its 52-week price high of $3.10.

Although an exclusive IP license agreement between its majority-owned subsidiary, Viking Energy Group, Inc., and ESG Clean Energy, LLC, for patenting a carbon capture system should bode well for the stock, several law firms have been investigating its subsidiary for alleged breaches of fiduciary duty and other violations of law.

Here’s what could influence CEI’s performance in the near term:

Acquisition Can Increase Costs

Last month, CEI announced the acquisition of a 60.5% interest in Simson-Maxwell Ltd., a leading manufacturer and supplier of industrial engines and other energy solutions, through its majority-owned subsidiary. The purchase price totaled  CAD3.99 million (approx. $3.2 million). Although this acquisition could strengthen CEI’s  platform and position it for further expansion across North America, it could also increase its expenses in the near term.

Delay in Filing Form 10-K

In May, CEI was notified by the NYSE American that it failed to  file its Form 10-K in a timely manner for the nine months ended December 31, 2020, and therefore was not in compliance with the Exchange's listing standards. The company disclosed that it could not file the report due to delays in putting together the financial information required to be reviewed by the auditor and finalizing the accounting of certain transactions. While CEI has been taking steps to complete the accounting to file the Form 10-K, if it fails to cure the filing delinquency within the given cure period, NYSE could suspend and delist it.

Weak Financials

CEI’s trailing-12-month revenue came in at $264,160 . However, its trailing-12-month gross loss stood at $19,000, while its operating loss came in at $4.2 million. Furthermore,  the company’s net loss amounted to $13.24 million. In addition, CEI reported a $9.750 net interest loss. Also, its trailing-12-month EBITDA came in at a negative $5.15 million, while its free cash flow stood at a negative $2.09 million.

The company’s trailing-12-month gross profit margin and cash from operations are negative 0.5% and $2.09 million, respectively. Furthermore, its ROE, ROA, and ROTC stood at negative 274.3%, 50.4%, and 13.8%, respectively. Also, CEI’s trailing-12-month asset turnover ratio of 0.01% is 96.5% lower than the 0.4% industry average.

Stretched Valuation

In terms of trailing-12-month EV/Sales, the stock is currently trading at 332.17x, which is significantly higher than the 2.75x industry average. Also, its 4.94 trailing-12-month Price/Book multiple  compares with the 1.48 industry average. And  CEI’s 26.65x trailing-12-month Price/Sales  is 1,770% higher than the 1.43x industry average.

POWR Ratings Reflect Bleak Prospects

CEI has an overall F rating, which translates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. CEI has an F grade for Quality. This reflects the stock’s negative ROE and cash flow from operations.

In terms of Value grade, the company has an F, which is reflective of its premium valuation. Also, it has an F grade for Stability. This justifies the stock’s relatively high 1.29 beta.

Beyond the grades I’ve highlighted, one can check out additional CEI ratings for Sentiment, Growth, and Momentum here. Of the 92 stocks in the C-rated Energy – Oil & Gas industry, CEI is ranked last.

Bottom Line

While CEI’s shares have been rallying based on retail traders’ interest, news related to the company’s delay in filing its Form 10-K and the NYSE’s  monitoring of the delays have raised investors’ concerns about the stock. Furthermore,  the company’s  poor cash balance and negative profit margin are not in sync with its stock’s current valuation. Thus, we think it is best avoided now.

How Does Camber Energy (CEI) Stack Up Against its Peers?

While CEI has an overall F rating in our proprietary rating system, one might want to consider taking a look at its industry peers, SilverBow Resorces, Inc. (SBOW) and Baytex Energy Corp. (BTEGF), which have an A (Strong Buy) rating.

CEI shares fell $0.83 (-100.00%) in premarket trading Tuesday. Year-to-date, CEI has declined -10.11%, versus a 21.98% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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