Up 16% YTD, This Russell 2000 Energy Stock Still Looks Cheap

The energy sector has been a standout performer so far in 2024, driven by a combination of robust demand, supply constraints, and geopolitical tensions. The S&P 500 Energy Sector ($SREN) is up nearly 11% on the year, outpacing the broader S&P 500 Index's ($SPX)return of 8.7%.

That strength extends to the small-cap universe, where Russell 2000 Index (RUT) component Gulfport Energy Corporation (GPOR) has been making some serious noise. This little energy champ's stock has jumped 16.9% since the year kicked off, and analysts are predicting more upside ahead. And despite that market-beating return - the Russell 2000 is up just 1.5% YTD - GPOR still looks like a bargain compared to other energy stocks, making it a decent value pick for investors looking to get in on the oil and gas action. 

Let's dive into why GPOR's valuation is so attractive here - and why it might not be a star in just the Russell 2000, but also the wider energy sector.

GPOR Stock Outperforms the Market

Gulfport Energy Corporation (GPOR) operates as an independent natural gas-weighted exploration and production company, primarily focused on the exploration, acquisition, and production of natural gas (NGM24), crude oil (CLM24), and natural gas liquids (NGLs) in the United States. Its strategic operations in the Appalachia and Anadarko basins have positioned it as a significant player in the energy sector.

GPOR stock has been a steady outperformer, up 70.7% over the last 52 weeks. Just last month, the shares hit a new all-time high of $165.19.

What's really interesting is how GPOR seems to be a bit of a hidden gem. Despite the stock's outperformance, the forward P/E ratio is sitting at 9.96, which is a healthy discount to the energy sector median of 11.04. Similarly, the stock's forward EV/EBITDA ratio of 4.34 compares favorably to the energy sector median of 5.77. This makes GPOR looks attractively valued at current levels.

That said, it's not all sunshine and rainbows for this energy stock. Gulfport's first-quarter earnings report, released last week, was a bit of a mixed bag. They missed the mark on earnings per share, coming in at $3.31 against the expected $4.32, and their adjusted earnings were also down from last year. Revenue of $283.2 million didn't quite hit the target analysts had in mind, either, which was around $289.3 million. 

GPOR banked $38.8 million in adjusted free cash flow during Q1, which did surpass expectations.

For the full fiscal year, analysts expect earnings per share to more than double to $18.35.

Gulfport Doubles Down on Stock Buybacks

Despite the earnings miss, Gulfport demonstrated strong operational performance during the quarter. They've been pumping out an impressive 1,057.4 MMcfe/day of natural gas and oil, which arrived in line with estimates. Plus, they've been breaking records left and right, like drilling the fastest Utica top hole ever, and getting more footage drilled each day. 

As commodity prices remain volatile, Gulfport's playing it smart with their hedging game. They've got about 60% of their natural gas production for the rest of 2024 covered with a safety net, ensuring they get at least $3.67/Mcf. And for 2025, they're already set up to sell a big chunk of their gas at a guaranteed price, with some leeway if prices go up. 

The company remains committed to its repurchase plans, too, and have been strategically buying back their own stock like there's no tomorrow. In the first quarter of 2024 alone, they scooped up about 210,000 shares for a cool $29.5 million. This is part of a bigger plan dating back to March 2022, under which they've already bought back 4.6 million shares, spending over $429 million. And they're not done yet:

“We plan to continue the return of capital to our shareholders and, excluding acquisitions, expect to allocate substantially all our full year 2024 adjusted free cash flow towards common stock repurchases,” said President and CEO John Reinhart.

This aggressive strategy of buying back shares isn't just about showing off their free cash flow. It's a clear sign that the folks running Gulfport believe their stock is a good buy. 

And it seems like the experts agree - analyst Gabriele Sorbara from Siebert Williams Shank & Co is all in, reiterating a "Buy" rating on GPOR stock in part due to their commitment to enhancing shareholder value through buybacks.

What's the Analyst Consensus on GPOR Stock?

Gulfport Energy enjoys a generally favorable outlook from market experts. 

The stock is currently rated as a “strong buy” by five analysts, with two more suggesting a “hold.” This “strong buy” consensus is backed up by a robust average price target of $176.43, which implies a potential upside of approximately 13.3% from current levels. 

And it's not just the analysts who are all in on Gulfport. There's a significant crowd of institutional players holding the stock, including Silver Point Capital L.P., JPMorgan Chase (JPM), BlackRock (BLK), and Vanguard. 

With its stock price on a steady climb, cash flow heading in the right direction, and a plan in place to hedge volatile gas prices, Gulfport looks attractively priced for investors looking to tap into the energy boom. Keep your eye on this small-cap standout – it's going places!