There are some out there questioning why anyone would predict SGY's share price to be $30 - $40 dollars a year from now. Excluding the usual market mayhem that may crop up over the next year, three cat-5 hurricanes back-to-back, total default on USD & debt, terrorism (Al Qaeda or Congress -- take your pick), I can safely say that not only is a double possible, it's darn near a certainty. It all boils to down to valuation and the price investors are willing to pay for growth. Further more, if the economy stages even a mild attempt at a sustained recovery, the uptick in NG consumption will drive NG prices through the roof and add even more to Stones bottom line.

Here's my reasoning. All SGY Stats from current Yahoo Stats page as of 6/11/09, so most of this is very stale data and I'm pretty much ignoring latest earnings release, never the less .......

EV = $1.53B

Forward P/E = 7.4

PEG = 1.02 (2 indicates growth at a reasonable price, <1 very undervalued)

PSR = 1.42 (PSR < 2 is undervalued, 2 is reasonably valued, >3 is overvalued)

PBR=2.19 (>5 indicates stock probably too expensive)

EV/EBITDA=4 (potential suitor could buy this stock @ enterprise value (EV) and pay for their acquisition in 4 yrs. Not a bad return, IMO)

EV/FCF= 3.43 (should be < 10)

Debt/OCF = 1.30 (should be < 5, they have their debt under control)

FCF/ Revenue = 70%. That's ( $446M) / $641M) x 100 -- this is an ATM gone berserk!

Short Ratio = 2.9 (as of 12/10/09, should be <5)

Two other key stats, ROE & ROA, are a disaster & still reflect the industry-wide damage of '08, but these alone do not necessarily reflect on the quality of company management. Latest blowout earnings are getting SGY back on track. Expect ROE & ROA to improve.

By all other traditional measures of valuation, SGY is very undervalued and still cheap even at today's price. Add to this the fact that their debt is reasonable & well controlled at this time.

Based on the price-sales-ratio (PSR = 1.42), SGY could appreciate over 40% on the same sales and STILL be reasonably valued with a PSR of 2 -- that's $27.75. With a PSR=3 and assuming same sales, we would get a theoretical 111% increase to around $42/shr before it was considered over-valued.

While it's fun to play with numbers like this, there are lots of other factors to consider, but a rough SWAG tells me SGY has a long ways to go before it becomes over-valued. I haven't even gone into the technical side of the business to analyze future drilling and production prospects or divine the future price of oil -- I'll let CATS do that bit of work, LOL.

Don't forget natural gas (about 50% of their product) is at all time lows due to over-supply and reduced consumption due to the recession. If the manufacturing / chemical sectors (big NG users) come back even a little bit, we could see a major hit on those fat NG supplies and see real demand pick up again. So Stone isn't running on all of its cylinders right now, so to speak; wait until NG prices crank up along with oil THEN watch those ROA & ROE figures start to roll up.

If the economy improves even slightly, look for NG prices to -- dare I say -- explode to the upside. That's the proverbial elephant in the room everyone is ignoring right now because NG is so cheap due to low demand. If NG takes off, SGY will embark on a new leg upward from the $30-$40 area -- maybe well north of $60 by 2012. That's just speculation, but someone could put together a scenario showing exactly how easily that could happen extrapolating from current valuation data.