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Is it too late to buy the smaller oil stocks? Stone Energy Corporation (SGY - Analyst Report) is trading near a multi-year high as crude soars. While shares are no longer as cheap as in 2011, this Zacks #1 Rank (Strong Buy) still has a forward P/E of just 8.5.

Stone Energy is an independent oil and natural gas exploration company with operations in the Gulf of Mexico, onshore Louisiana and the Appalachia region. The company uses acquisitions and exploration to increase its production volumes.

Stone Beat For the 5th Straight Quarter

On Feb 22, Stone reported its fourth quarter results and surprised on the Zacks Consensus Estimate by 18.5%. Earnings per share were 96 cents compared to the consensus of 81 cents. The company made just 49 cents in the year ago quarter.

Increasing production is the name of the game for the explorers. Net daily production volumes increased to 35.1 MBoe (210 MMcfe) from 34.7 MBoe (208 MMcfe) in the fourth quarter of 2010.

The company is in the process of acquiring the deep water Pompano Field from BP. The transfer is ahead of schedule and expected to occur in March 2012. There is a 3-year plan for this field starting this year. Currently, it nets about 3,500 Boe per day.

Prices soared to an average of $110.39 per Bbl of oil from $76.92 per Bbl a year ago. But Stone did get hit on lower natural gas prices. It fell to $4.44 per thousand cubic feet from $5.31 a year ago.

Cash flow climbed 44% in 2011 to $637.7 million from $438.3 million in 2010.

Zacks Consensus Estimates Rise

Stone expects production to increase in 2012. The analysts are also bullish.

The Zacks Consensus Estimate rose to $4.01 from $3.93 in the last 7 days. That is essentially nearly flat earnings growth from 2010, however, when the company earned $4.00.

Shares Near New High

In the last several months, investors have finally discovered the energy exploration companies again. Stone is trading near a new multi-year high.

Yet there is still value.

Stone's forward P/E of 8.5 is well under its peers which trade at 14.5x.

It also has a price-to-book ratio of 2.5, which is under the 3.0 cut-off I use for value stocks.

Stone also has other solid fundamentals, including a 1-year return on equity (ROE) of 32.1%. Its peers have an average ROE of only 11.2%.

Energy is hot. And Stone is still cheap. There's still time to find value among the small explorers.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

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