Diamondback Energy (FANG) is a growth stock to watch as it's one of the few IBD 50 stocks that is setting up in a new base. The constructive action of this energy stock comes after the company posted huge earnings gains in recent quarters.
XThe oil company has thrived amid resiliently strong oil prices that are hovering around $100 a barrel. That's up from $62.83 a year ago. The price of West Texas intermediate crude oil front-month contracts traded on the Nymex rose more than $5 a barrel to above $105 Wednesday.
Operations of Midland, Texas-based Diamondback Energy focus on the Permian Basin in West Texas. Higher oil prices have fed Diamondback's earnings surge. Profit soared 1,500%, 374%, 343% and 126% the past four quarters.
Analysts Estimate 165% Profit Growth
The consensus estimate by analysts tracked by FactSet is for second-quarter earnings per share of $6.36. That would be up 165% from a year earlier. Sales are seen rising 64% to $2.39 billion. Analysts predict earnings for all of 2022 will rise 116% to $24.32 a share on a 36% sales increase to $9.27 billion.
FANG stock ranks No. 14 in the oil & gas U.S. exploration and production group, according to Stock Checkup. The group itself sits at No. 11 out IBD's 197 industry groups. That's about where it's stood three weeks ago and six weeks ago.
Diamondback bristles with high IBD ratings. Its profit growth has earned it a lofty Earnings Per Share Rating of 94. Its recent stock price action has resulted in a Relative Strength Rating of 97. Those and other strong IBD fundamental and technical ratings combined have landed a perfect 99 for its Composite Rating.
Growth Stock To Watch: FANG Stock
FANG stock is in the seventh week of a consolidation, according to MarketSmith chart analysis. The stock price pattern doesn't meet the test of more conventional bases that are favored by the CAN-SLIM stock investing method. But such stock price consolidations can lead to big gains.
This latest base started when the stock peaked at 147.99 on March 25. Shares soon dipped to just above their 10-week moving average for four weeks before slicing below the line on April 22. The stock has rallied from its interim low of 119.76 and sits about 14% below its 148.09 buy point.
A troubling flaw is that the stock has yet to retake its 50-day moving average. Investors will want to check to see if this growth stock to watch can overcome resistance at this line, which would be a bullish sign.
Back on the positive side of the ledger, the weekly view of Diamondback Energy's chart on MarketSmith shows the stock sports a blue dot over the right side of its relative strength line. This indicates the stock has an RS line that has recently reached new highs.
Watch For Stocks Holding Up
With the Dow industrial average, S&P 500 and the Nasdaq composite all down from 12% to 26%, now's the time put away lamenting how far the major indexes have fallen. Instead focus on spotting a market bottom and the start of a new rally along with the stocks that will lead it.
IBD's daily Big Picture article with its Market Pulse feature can help you stay on top of stock market news and changes in the market's direction.
As of now, Diamondback Energy has many of the hallmarks of a market leader, and so is a growth stock to watch.
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