Imperial Oil Ltd. (IMO) Booming But Could it Explode?


Investments in energy stocks are tricky ones. Being a highly capricious sector, investors often tend to invest in the best-performing stocks of the oil and gas industry, which could absorb shock to a certain extent in case of a downward slide in the stock. Imperial Oil Ltd. (NYSE: IMO) is one such stock. The company, having a massive market capitalization of $34.55 billion, has garnered significant investor interest during the last few weeks, even though its P/E ratio of 79.45 is an indicator of a very risky investment. However, as the global oil prices are soaring, the stock is in an excellent position to provide hefty returns to investors going in the future till the situations changes.

What’s Up for IMO?

In the recent past, Imperial Oil has shifted its focus to the reduction of greenhouse gas emissions. Weeks ago, the company announced an ambitious plan in this regard. It said that it would reduce the Scope 1 and 2 greenhouse gas emissions intensity of its oil sand facilities by 30 per cent by the end of 2030. The plan is to be implemented via the adoption of lower greenhouse gas-producing technologies as well as improvement of efficiency at its facilities.

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The Earnings

On the earning front, outstanding last few months. The company reported EPS of $0.94 for the fourth quarter of 2021 compared to $0.02 during the same quarter of 2020. However, the reported EPS of the quarter missed the consensus estimate of $1.07 by $0.13. Looking ahead, IMO is expected to release the next earnings results (for the first quarter of 2022) on the 28th of April. The consensus estimate for the EPS for this quarter stands at $2.92, while during the first quarter of 2021; the EPS was calculated to be $0.02.

Risks & Hazards

Despite all its outstanding figures and performance, investment in IMO stock is a risky task, as evident from a P/E ratio of 79.45, the reason being price volatility associated with the energy sector. As of now, the sector is booming due to high demand and less supply. However, in case oil prices slide in the future, it would severely impact the now thriving oil and has stocks.

Final Remarks

IMO stock has soared by more than 40% since the start of 2022, a clear indication that despite the risks it carries, the stock provides an excellent opportunity to gain hefty returns in a short period, a strategy that investors would be aiming for.


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