CASE STUDY UPDATE: Journey Energy (JOY.TO / JRNGF)

September 29, 2024

Journey Energy is a Canadian oil and gas producer that is also becoming a significant producer of electric power.  Journey’s stock is extremely cheap and the company is poised for significant growth in 2025.

The CEO Alex Verge has a long history of creating value in the oil and gas industry.  And he has bought a great deal of Journey Energy stock on the open market.

The market cap is $109.7 million, while enterprise value is $143.4 million.

Metrics of cheapness:

    • EV/EBITDA = 3.04
    • P/E = 9.34
    • P/B = 0.46
    • P/CF = 1.86
    • P/S = 0.73

(The P/E is based on forward earnings.)

ROE is 3.85% but will increase in 2025.

The Piotroski F_Score is 5, which is OK.  This also will likely improve in 2025.

Insider ownership is 7.6%, which is solid.  Cash is $18.91 million, while debt is $64.29 million, almost all of which is due in 2029.  Total liabilities to total assets is 46.4%, which is decent.

Intrinsic value scenarios:

    • Low case: If there’s a bear market or a recession and/or if oil prices decline, the stock could decline. This would be a buying opportunity.
    • Mid case: NAV based only on proved developed producing assets is $3.70 per share, which is 105% higher than the current stock price of $1.80 per share.
    • High case: EV/EBITDA today is 3.04 but should be approximately 8.00.  That would mean an enterprise value of $377.37 million or a market cap of $343.67 million.  This means an intrinsic value of $5.64 per share, which is over 210% higher than today’s $1.80.

 RISKS

    • If there’s a bear market or a recession, the stock could decline temporarily.
    • Oil prices may even decline.

 

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