Comstock Resources (CRK) Update - Jan 3
Posted: Sun Jan 03, 2021 3:17 pm
I took a hard look at my forecast/valuation model for Comstock on Sunday and I extended it through 2022. I've increased my valuation by $0.50 to $8.50.
Comstock has given production guidance for 2021 of 1,325,000 to 1,425,000 mcfepd. I'm using the midpoint, but this management team has a habit of "under-promising and over-delivering".
TipRanks: "In the last 3 months, 4 ranked analysts set 12-month price targets for CRK. The average price target among the analysts is $8.05." The most recent analysts' report is from Stifel on 12-18-2020 that rates it a BUY with a price target of $9.20. Truist Financial downgraded it to a HOLD on 12-15-2020, but did not provide a price target. I think the downgrade was just because of the pullback in gas prices.
Comstock has approximately $2.00 operating cash flow per share locked in for 2020 and at the midpoint of their production guidance for 2021 I forecast them generating ~$700 million of cash flow from operations in 2021 and ~$150 million of FCF. My $2.95 operating CFPS forecast for 2021 compares to First Call's operating CFPS forecast of $2.69.
IMO the stock should be trading for at least 3X operating CFPS. My updated valuation is $8.50.
My valuation is based on realized gas prices (net of settlements on hedges) of $2.60/mcf for 2021 and 2022.
The balance sheet is in decent shape and they have plenty of liquidity. No near-term debt issues that I can find. No reason the stock should be trading below book-value per share.
There is significant upside for us on CRK if the "gassers" come back in favor because that should draw multiple expansion for the group.
Comstock has given production guidance for 2021 of 1,325,000 to 1,425,000 mcfepd. I'm using the midpoint, but this management team has a habit of "under-promising and over-delivering".
TipRanks: "In the last 3 months, 4 ranked analysts set 12-month price targets for CRK. The average price target among the analysts is $8.05." The most recent analysts' report is from Stifel on 12-18-2020 that rates it a BUY with a price target of $9.20. Truist Financial downgraded it to a HOLD on 12-15-2020, but did not provide a price target. I think the downgrade was just because of the pullback in gas prices.
Comstock has approximately $2.00 operating cash flow per share locked in for 2020 and at the midpoint of their production guidance for 2021 I forecast them generating ~$700 million of cash flow from operations in 2021 and ~$150 million of FCF. My $2.95 operating CFPS forecast for 2021 compares to First Call's operating CFPS forecast of $2.69.
IMO the stock should be trading for at least 3X operating CFPS. My updated valuation is $8.50.
My valuation is based on realized gas prices (net of settlements on hedges) of $2.60/mcf for 2021 and 2022.
The balance sheet is in decent shape and they have plenty of liquidity. No near-term debt issues that I can find. No reason the stock should be trading below book-value per share.
There is significant upside for us on CRK if the "gassers" come back in favor because that should draw multiple expansion for the group.