The average target price of OBE is 7.2 and suggests 51% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 7.2. This translates into 51% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 7.2. This suggests 51% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Obsidian Energy Ltd. primarily focuses on the exploration, production, and development of oil and natural gas properties in the Western Canada Sedimentary Basin. The company was formerly known as Penn West Petroleum Ltd. and changed its name to Obsidian Energy Ltd. in June 2017. Obsidian Energy Ltd. is headquartered in Calgary, Canada.

Canada

Obsidian Energy Ltd.

Energy

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

OBE reported revenue of CAD 813mn in the last 12 months, up 4% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 2% from FY24 to CAD -2.51. Market expects EPS to reach CAD 1.80 in FY25.

Over the past six months, the stock has consistently fallen, resulting in a 16% total decrease. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 9ppts. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 54.3% in the last 12 months, up from 53.6% in FY23. 

Historically, OBE has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -24.5%, down from 14.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -10.3%, below the peers. The consensus estimate for FY24 for RoCE is 11.6%, however, this time ahead of the peers. 

Another important profitability metric, return on assets (RoA), amounted to -9.0% in the last 12 months, a decrease from 4.8% in FY23. The market analysts predict that RoA will be 6.6% in FY24, more robust than its peers in this period. 

Obsidian Energy Ltd. reported a return on equity (RoE) of -13.0% in the last 12 months, down from 6.7% in FY23. The market consensus projects an RoE of 9.0% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.3 in the past several years. This ratio implies a average shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

OBE has above average trading liquidity. The average private investor can sell his common position in the stock in a single trading day. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, negligible return on capital, excessive margin volatility, and poor working capital management.

In highly turbulent market conditions, OBE is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant. 

In normal market circumstances, OBE is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from critical to immense. 

Considering past and projected metrics, the stock is 'cheaper' than its peers. In particular, the stock is overpriced on P/E, 'cheap' on EV/EBITDA, trading at neutral levels on P/FCF. 

Obsidian Energy Ltd.

$ 4.7

3

Obsidian Energy Ltd.

$ 4.7

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 4.7

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