GRNT

Granite Ridge ($GRNT) Executives Buy Aggressively: 41 Purchases in 14 Months After 23% Stock Decline - Undervalued at 3.67x EV/EBITDAX?

08/12/2025 19:54

Granite Ridge Resources ($GRNT) executives have been aggressively buying shares amid the recent stock decline, drawing significant investor attention. Director Matthew Miller's purchase of 18,700 shares at $5.36 per share for approximately $100,000 on August 12th caps off a consistent insider buying spree that has continued since June 2024, sending strong confidence signals about current valuation levels. Granite Ridge is an oil and gas exploration and production company with approximately $680 million market capitalization, holding non-operated interests across six major U.S. shale basins. Based in Dallas, Texas, the company operates an asset portfolio targeting full-cycle returns above 25% across the Permian, Eagle Ford, Bakken, Haynesville, and DJ basins. Insider trading analysis reveals 41 purchase transactions over the past 14 months with zero sales, a remarkable unanimity among management. Director Matthew Miller has been particularly active, consistently adding shares since June 2024, including approximately $250,000 in purchases over just two days in November 2024. Former President Luke Brandenberg also demonstrated conviction with approximately $100,000 in May purchases followed by another $35,000 in June. This insider buying becomes more significant given the stock's substantial correction from recent highs. $GRNT traded near $6.60 in November 2024, plummeted to the $4.60s in April, recovered to $6.60 in June, but now trades around $5.25. The 23.4% decline following Q2 earnings likely presented what insiders viewed as a compelling buying opportunity. Second quarter results showed solid operational performance but fell short of market expectations. Daily production increased 37% year-over-year to 31,576 barrels of oil equivalent (Boe), while revenue grew 28% to $109.2 million. Net income surged 397% from $5.1 million to $25.1 million year-over-year. However, adjusted earnings per share of $0.11 missed analyst estimates of $0.13, triggering the selloff. The key investment consideration is the company's fundamental competitive strength. Granite Ridge maintains a conservative financial structure with net debt-to-adjusted EBITDAX of just 0.8x and operating margins of 43%. The company also provides a high dividend yield of 8.38%, demonstrating strong cash flow generation capabilities. From an industry perspective, the U.S. energy market in H2 2025 has shown relative stability despite geopolitical risks and crude price volatility. Particularly as the Trump administration's tariff policies pressure semiconductor and pharmaceutical sectors, energy companies find themselves in relatively favorable positions. However, investors must consider several risk factors. Levered free cash flow is negative at -$124.1 million, indicating that substantial capital expenditures are pressuring cash flow. Additionally, the dividend payout ratio of 176% exceeds net income, raising questions about dividend sustainability. Nevertheless, management's consistent buying behavior suggests several positive signals. First, executives believe current share prices significantly undervalue the company. Second, they have confidence in future performance improvements. Indeed, the company raised 2025 production guidance by 10% to 31,000-33,000 Boe per day. From a valuation perspective, $GRNT trades at an attractive EV/EBITDA of 3.67x, well below the industry average of 6-8x. The forward P/E ratio of 11.67x appears reasonable and reflects expectations for earnings improvement. In the near term, Q3 earnings (expected in November) will serve as a key inflection point. If the company achieves its raised production guidance and demonstrates operational efficiency improvements, current insider buying will prove prescient. Conversely, crude price declines or rising operating costs could pressure margins and trigger further corrections. Long-term prospects benefit from structural maturation in the U.S. shale oil industry, where companies with quality assets are attracting M&A interest. December 2024 reports of Northern Oil & Gas making acquisition offers for $GRNT demonstrate the strategic value of the company's assets. In conclusion, Granite Ridge Resources presents an intriguing investment opportunity combining strong insider buying signals with attractive valuation metrics. However, given the inherent volatility of energy stocks and cash flow concerns, investors should approach this opportunity within appropriate portfolio allocation limits.