How Gulf Keystone Petroleum Limited (GKP) Measures up as a GARP Investment

Page 1 of 2

LONDON — A popular way to dig out reasonably priced stocks with robust growth potential is through the “Growth at a Reasonable Price”, or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share’s price weighs up in relation to its near-term growth prospects — a reading below 1 is generally considered decent value for money.

Today I am looking at Gulf Keystone Petroleum Limited (LON:GKP) to see how it measures up.

What are Gulf Keystone Petroleum’s earnings expected to do?

2013 2014
EPS Growth n/a 2,396%
P/E Ratio 457.3 18.3
PEG Ratio n/a 0.1

Source: Digital Look

Gulf Keystone Petroleum Limited (LON:GKP) is expected to swing from losses per share of around 6 pence last year to modest earnings per share (EPS) growth, to 0.3 pence, in 2013. Still, EPS is forecast to rev up from next year onwards, according to City analysts, with EPS of 7.6 pence widely anticipated.

This year’s expected earnings rebound from 2012′s losses creates an invalid PEG rating, although next year’s stratospheric improvement leaves the metric trading fractionally off 0, a figure which represents massive value.

For the current year, the firm trades well above the price-to-earnings (P/E) ratio benchmark of 10 — any reading below this value represents decent value — although this is expected to improve significantly in 2014.

Does Gulf Keystone Petroleum provide decent value against its rivals?

FTSE AIM 100 Oil and Gas Producers
Prospective P/E Ratio 29 30.8
Prospective PEG Ratio 2 0.5

Source: Digital Look

Gulf Keystone Petroleum Limited (LON:GKP)’s invalid forward PEG rating does not allow a comparison with its oil and gas rivals, and the broader FTSE AIM 100, to be made. On a prospective P/E basis, meanwhile, the company significantly lags both of these groups.

It could be argued that Gulf Keystone Petroleum Limited (LON:GKP)’s improvement from this year lays the foundations for its case as a delectable GARP investment, with improving production anticipated to drive earnings skywards. However, I would argue that remains a risky pick as the outcome of ongoing legal action could have huge ramifications for the stock.

Production surge expected but court case weighs
Gulf Keystone Petroleum Limited (LON:GKP) announced last week that losses after tax rocketed 31.1% during 2012, to $81.8 million. However, the firm saw group production rally more to 832,859 barrels of oil, up markedly from 200,137 barrels in the previous 12 months. This helped to push revenues 367% higher to $32.2 million.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!