Patterson-UTI Energy is in a buy zone with a buy point of 17.18. The energy stock completed a five-month double-bottom base last week, surging in strong volume and claiming the buy point. It also rose above the 50- and 200-day moving averages.
Last Thursday, PTEN stock ejected from the base in a bullish breakaway gap.
A breakaway gap is a strong and early bullish indicator for a stock. PTEN's breakaway gap followed a series of positive sessions, as the stock built the last part of its base in late September.
Energy Stock: Strong Technical And EPS Ratings
The energy stock, which holds a 94 Composite Rating and 97 Relative Strength Rating, ranks third in the Oil & Gas-Drilling group. The group holds 44th place amongst IBD's 197 industry groups.
The stock is in the elite IBD 50 list of growth stocks due its strong technical ratings and recent earnings performance.
Patterson provides drills and pressure pumps for onshore oil operations in Texas and the Appalachian regions, with over 250 land-based oil rigs. It also holds interests in oil properties in Texas and New Mexico.
Third-quarter revenue grew 103% to $727.5 million, from $357.9 million in Q3 2021. Earnings of 28 cents per share marked a recovery from a 44-cent loss last year. Growth for the energy stock benefited from strong rig demand and firm pricing, despite rising inflationary costs.
A recent Patterson-UTI survey predicts 90 rigs will be added to U.S. drilling capacity through 2023. This increased activity comes as the war in Ukraine triggered sanctions on Russian oil, driving up demand. Rising oil prices will also likely increase rig demand.
Around 40 rigs are expected to come online in the coming quarter alone.
The company plans to return 50% of free cash flows to shareholders via dividends and share buybacks. The dividend has now risen to 8 cents per share, payable to shareholders on record as of Dec. 2. The company has also increased its share buyback program to $300 million.
PTEN stock has a poor SMR Rating of D and lower EPS Rating of 77, but those ratings will improve if it continues the latest quarter's achievements.
Mutual Funds Own Majority of PTEN
Mutual funds own 68% of shares of the energy stock. Its accumulation/distribution rating of B+ also indicates a good level of institutional interest.
However, fewer funds bought the stock in the latest quarter. Even so, the majority of the stock is held with funds, which marks strength, according to the CAN SLIM investment strategy.
Exchange traded funds that include Invesco S&P Small Cap Energy and iShares US Oil Equipment & Services also hold shares of Patterson.
