EP

We rate EMPIRE PETROLEUM CORP (EP) as Avoid with a composite score of 27.8/100 at a current price of $3.03. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in investment (49th percentile) and quality (41th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (4th percentile) and stability (14th percentile) tempers our overall conviction. We assign a Narrow Moat rating (53/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

EMPIRE PETROLEUM CORP holds a top-quartile position (#0 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 27.8/100 places it at rank #4653 in our full 7,333-stock universe. At $153M in market capitalization, EMPIRE PETROLEUM CORP is a small-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -100% combined with momentum at the 4th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 109% (+66.1pp vs sector) narrow to operating margins of -29% (-41.1pp vs sector) and net margins of -33.3%, yielding a gross-to-net conversion rate of -31%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $3.03, EMPIRE PETROLEUM CORP is trading at a premium to fundamental value. Our value factor score of 32/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 0.2x (a 99% discount to the sector median of 13.7x), EV/EBITDA of 0.1x (discounted to peers), P/S of 0.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Very High uncertainty rating to EMPIRE PETROLEUM CORP. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.74), significant leverage (124% debt-to-equity), current negative profitability (net margin -33.3%). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.74); significant leverage (124% debt-to-equity); current negative profitability (net margin -33.3%); below-average price stability (14th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 14th percentile and quality factor at the 41th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 109% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate EMPIRE PETROLEUM CORP's capital allocation as Poor. Key concerns include low returns on equity (2.0%), negative profitability, weak asset returns (ROA 0.9%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — EMPIRE PETROLEUM CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, EMPIRE PETROLEUM CORP receives a Avoid rating with a composite score of 27.8/100 (rank #4653 of 7,333). Our quantitative framework assigns a Narrow Moat (53/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 28/100.

Our analysis does not support a constructive view on EMPIRE PETROLEUM CORP at this time. The combination of the current quantitative profile, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.