With just a passing glance, today's 10% surge from Gastar Exploration Limited (AMEX:GST) might be dismissible. Oh, the percentage gain itself is a whopper, but when a stock's priced less than $5.00 per share, it doesn't take much 'up' to look like a big gain. The market knows this too, and has largely shrugged its shoulders at the big move from GST. Big mistake. Today's small move actually seals the deal for what's likely to be the beginning of a huge advance.
The nearby daily chart of GST partially tells the tale. With today's nudge, the stock's crossed back above the pivotal 200-day moving average line. It's the first time the stock's been above the key long-term indicator line since 2011. More than that, however, the bullish crossover has unfurled in the shadow of a string of higher lows and higher highs from Gastar Exploration Limited... a string that started back with November's low. To fully appreciate how much of a paradigm shift this is, though, take a look at this weekly chart of GST; the prior losing streak has been broken by a budding winning streak.
The prod for the rebound? Great question. Most likely it stems from Gastar Exploration Limited's recently-posted Q4 results. The timing doesn't align perfectly, in that the rebound started in the latter part of last year, and GST didn't post Q4 earnings until last week. Likewise, the stock's rally today is the best daily gain we've seen in a while, even though Gastar Exploration actually posted those numbers on the 11th. Point being, this isn't necessarily an earnings-based bounce. That's not a bad thing, however. In fact, it may be a very good thing.
Gastar Exploration Limited is, in simplest terms, and American natural gas success story. Last quarter's natural gas revenue grew from $9.8 million a year earlier to $18.9 million in the fourth quarter of 2012. Per-share income reached (operational) $0.07, versus a loss of $0.02 in Q4 of 2011. On a full-year basis, operational cash flows ramped up from $12.8 million in 2011 to 2012's $24.5 million. It was all in increase in production too, as its selling prices this time around - quarterly as well as annually - were the same or less than the year-ago comparable.
So why hasn't this rare success become a hotter story? Much of it may stem from the fact that Gastar Exploration Limited is only a $94 million company, and not on a lot of investors' radars. Yet, value is a relative thing, and GST actually packs quite a bit of it into a fairly small package. The forward-looking P/E of 24.8 is not only palatable given its growth rate, it's actually on the low side given Gastar's combination of size and growth.
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