How high can the GKP share price go after trebling in one year?

Does Gulf Keystone Petroleum Limited (LON: GKP) offer further capital growth potential?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The last year has been a successful period for the Gulf Keystone Petroleum (LSE: GKP) share price. The oil producer’s valuation has risen by around 200% due, in part, to the improving oil price outlook. Its financial prospects now seem to be brighter, and investors are happy to take greater risks in the oil and gas sector. Looking ahead, further share price growth could be on the cards.

Not all resources stocks have enjoyed such strong performance, though. Reporting on Friday was a mining company which could offer investment potential after a volatile period.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Uncertain outlook

The company in question is gold miner SolGold (LSE: SOLG). Its final results showed that it’s been an eventful year for the company, having progressed with substantial parts of its Ecuadorian portfolio. For example, its Cascabel project has moved ahead, while the company has also identified 10 key regional projects to progress on. It also raised £45m in November 2017 to continue drilling at Cascabel, and seems well-placed to deliver further progress over the medium term.

The company’s share price performance has been highly volatile in the last year. While it’s up 16% during the period, there have been large parts of the last 12 months where it’s also been significantly down.

Looking ahead, SolGold could experience further volatility. A rising US interest rate is making income-producing assets more attractive to investors, while a stronger US dollar is also hurting demand for gold, to some degree. In the long run, however, the prospects for the gold price could be positive due to the potential for higher inflation and economic uncertainty. As such, and while potentially volatile in the near term, the stock could have investment appeal.

Improving financial performance

Gulf Keystone Petroleum’s financial prospects are set to improve dramatically over the medium term. The company is expected to post a rise in earnings of 63% in the next financial year, and this could help to improve investor sentiment. With the company’s shares trading on a price-to-earnings growth (PEG) ratio of 0.1, they seem to offer an impressive buying opportunity, based on their risk/reward ratio.

Clearly, there’s still the potential for heightened geopolitical risk in areas the company operates. This could cause high volatility in future, but ultimately, this risk appears to have been priced into the company’s valuation when compared to both sector and index peers.

With the prospect of a buoyant oil price due to stable demand and an uncertain outlook for supply, the oil and gas sector could continue to perform relatively well. While there may be less risky options than Gulf Keystone Petroleum that have greater diversity and more stable balance sheets, for less risk-averse investors the stock could hold investment appeal. A 200% share price rise over the next year may not be possible, but significant capital growth could nevertheless be ahead over the long term.

More on Investing Articles

Female florist with Down's syndrome working in small business
Investing Articles

2 promising penny stocks to buy on the dip

As stock markets continue to correct, I am hunting for oversold penny stocks that I think could help turbocharge my…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

I wouldn’t buy Bitcoin today. FTSE value stocks look much better value to me

Now looks like a promising time to buy UK value stocks, while Bitcoin still looks far too risky for me.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price is below 85p. Here’s what I’m doing!

The Rolls-Royce share price has suffered this year. Trading for below 85p, this Fool decides whether this is an opportunity…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

4 dividend stocks to buy as inflation soars!

I'm hunting for the best dividend stock to invest in as global inflation soars. Here are several high-dividend-yield shares that…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

UK shares to buy now: 3 big fallers I’d snap up

Our writer thinks this trio of strong business performers could be attractive UK shares to buy now for his portfolio.

Read more »

Lady researching stocks
Investing Articles

Could a falling stock market help me get rich?

When the stock market falls, what does it mean for our writer's portfolio? Here's why it could be an opportunity.

Read more »

Hand holding pound notes
Investing Articles

Should I buy these two 12%-yielding dividend shares for my Stocks and Shares ISA?

Do these double-digit dividend yielders offer our author the right balance of risk and reward for his Stocks and Shares…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 reasons to buy Lloyds shares at 43p

Our writer outlines three factors that make him bullish on Lloyds shares, as well as one noteworthy risk facing the…

Read more »