The shale boom certainly has been kind to CARBO Ceramics (NYSE:CRR). Producing one of the key ingredients needed to “crack” the hard rock and release the trapped gas, CARBO has been riding high for the past few years.
The company’s ceramic proppant, which replaces sand used in the hydraulic fracturing process, has been in high demand since the fracking boom started. At its core, CARBO’s artificial sand helps drillers improve productivity. With the bulk of new wells doting the U.S. landscape of the hydraulically fracked variety, CARBO is seeing huge demand for its cost-saving products.
CARBO shares have plunged about 50% since their 2011 peaks; the culprit could be the recent shift from away from natural gas toward more profitable shale oil and natural gas liquids. Drilling for these fuels require a different set of proppants called guar gel — something CARBO doesn’t manufacture. However, with the U.S. getting ready to begin exporting natural gas, well production will increase, which ultimately means more business for CARBO.
Analysts expect good things too, forecasting 12% earnings growth for FY12 and 30% growth in 2013. The firm also has zero debt and throws out a modest 1% dividend. At a price/earnings-growth ratio of 0.39, shares are deliciously cheap right now.