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Is Cardinal Energy Ltd. the Top Energy Stock You’ve Never Heard of?

Cardinal Energy Ltd. (TSX:CJ), one of the fastest growing junior oil and natural gas producers in Canada, announced fourth-quarter earnings results after the market closed on March 23, and its stock has responded by rising over 2% in the trading sessions since. Let’s take a closer look at the quarterly results to determine if we should consider initiating long-term positions today, or if we should look elsewhere for an investment instead.

Acquisitions driving revenues higher

Here’s a summary of Cardinal’s fourth-quarter earnings results compared to its results in the same period a year ago.

Metric Q4 2014 Q4 2013
Diluted Earnings Per Share $0.46 $2.33
Petroleum & Natural Gas Revenue $63.16 million $12.25 million

Source: Cardinal Energy Ltd.

Cardinal’s fully diluted earnings per share decreased 80.3% and its revenue increased 415.8% compared to the fourth quarter of fiscal 2013. The company’s steep decline in net income and triple-digit increase in revenue can be attributed to two major acquisitions it made in Alberta in the third quarter, which led to its average daily production increasing 405.2% to 10,888 barrels of oil equivalents per day.

Here’s a quick breakdown of six other notable statistics from the report compared to the year-ago period:

  1. Average production of crude oil and natural gas liquids increased 418.9% to 10,197 barrels per day
  2. Average production of natural gas increased 264.1% to 4.15 million cubic feet per day
  3. Funds from operations increased 2,094.1% to $26.57 million
  4. Funds from operations increased 475% to $0.46 per diluted share
  5. Development capital expenditures increased 2,563.1% to $9.88 million
  6. Net debt increased 487.7% to $54.07 million

Is now the time to buy Cardinal Energy?

Even after the slight post-earnings pop in Cardinal’s stock, I think it represents a great long-term investment opportunity, because it trades at inexpensive valuations and pays a very high dividend.

First, Cardinal’s stock trades at just 12.3 times fiscal 2014’s diluted earnings per share of $1.20, which is very inexpensive given its long-term growth potential, and this multiple would be even lower had the company not made the aforementioned acquisitions. I think the company can easily make over $2 per share in fiscal 2015 as a result of its increased production capacity and sales potential, which would give it a forward multiple of under 7.5.

Second, Cardinal pays a monthly dividend of $0.07 per share, or $0.84 per share annually, giving its stock a very high 5.7% yield at current levels and making it a value, growth, and dividend play today.

With all of the information provided above in mind, I think Cardinal Energy represents a great long-term investment opportunity today. Foolish investors should take a closer look and consider establishing positions.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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