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Sky High Expectations for This Stock, But Will Growth Continue for Callon Petroleum Company (NYSE:CPE)

Callon Petroleum Company (NYSE:CPE) shares have been experiencing accelerated earnings and sales growth over the past five years.  Over that time frame the firm has seen earnings growth of 179.10% and sales growth of 41.80%.

As any seasoned investor knows, markets can move up or down in the blink of an eye. Investors who attempt to beat the market without creating a plan may find themselves grasping at straws down the line. Building a plan that included the right level of risk may be different for every individual. Managing risk and staying on top of the stock portfolio can help investors ride out the storm when it eventually rolls in. Anybody who manages their own portfolio knows that it can be extremely challenging at times. Finding a consistent process that works when markets become volatile can be a big help to the investor. Controlling emotions and conducting the necessary research can help the investor make the difficult decisions when they crop up.

While the firm has enjoyed the upward movement, it’s important to look at analyst expectations and where the company is headed from here.  On a consensus basis, analysts are projecting EPS growth of 41.49% for next year and have a $9.85 one year price target on the stock.   The stock recently traded at $5.16.

 Six Fundamental Characteristics of Great Growth Stocks

#6 Huge Mass Markets – The more potential customers there are, the greater the possibility that both the company, and the investment in said company, will be a success. 

#5 Market Dominance/Barriers to Entry – Look for companies who hold patents.  This is great barrier to entry, ensuring no competition.  Look for companies who dominate the market, blowing away the competition, though market dominance can be harder to measure. 

#4 Accelerating Earnings Growth – If a company’s earnings growth rate increases for two consecutive quarters, their growth is accelerating.  Faster growth is better growth, and a company whose earnings growth rate is accelerating is an attractive investment.

#3 Triple-Digit Revenue Growth – Companies growing their revenues at triple-digit rates (100% or better) are usually smaller and less known, making them attractive for buying by institutions. 

#2 High Profit Margins – In recent decades, high-margin stocks have beaten low-margin stocks by a huge amount. 

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#1 Top Notch, Innovative Management – All great managers who led their companies to success usually did so by thinking differently.  There is no surefire and quick measurement of management talent.  When you find a top manager, one with a record of prior success and accolades, you should strike.  Top managers usually find a way to overcome obstacles. 

RECENT PERFORMANCE

Let’s take a look at how the stock has been performing recently.  Over the past twelve months, Callon Petroleum Company (NYSE:CPE)‘s stock was -22.34%.  Over the last week of the month, it was 10.77%, -37.78% over the last quarter, and  -37.85% for the past six months. 

Earnings Per Share (EPS):

EPS is what each share is worth and indicates how much money their sharehoders would acquire if the company was to pay out all of its profits.  Earnings Per Share is computed by dividing the profit total by its share total.  If a company’s profit is $800 million and there are 40 million shares, then the EPS is $20.  EPS is a fantastic way to compare and contrast companies in the same industry.  When a company shows a steady upwards earnings trend, it is a good indicator that the company will dominate companies with a more volatile earnings trend.

Callon Petroleum Company (NYSE:CPE)’s EPS is 0.97.  Last year, their EPS growth was 140.60% while their EPS growth over the past five years is 179.10%.  Analysts are predicting Callon Petroleum Company’s stock to grow 41.49% over the next year and 20.70% over the next five.

Investors may be trying to gauge the current business cycle phase and how that could potentially impact the portfolio. Business cycles can be one way to analyze portfolio performance. Early on in the cycle, profits tend to grow rapidly, sales tend to improve, and activity rebounds. In the middle of a cycle, growth may be peaking, strong credit growth may still be seen, and policy may swing neutral. Toward the later stages, growth may be moderate, earnings may come under pressure, and credit may tighten. Heading into a period of recession, credit may completely dry up, profits may decline sharply, and there may be policy easing. Investors will often have to adjust portfolio holdings that reflect the current state of a business cycle.

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