Today is Wednesday, May 13, 2020, and this is your daily energy stocks roundup. Today we're looking at the valuations of HollyFrontier Corporation (NYSE: HFC), Bonanza Creek Energy (NYSE: BCEI), and WPX Energy (NYSE: WPX).
HollyFrontier Corporation (NYSE: HFC) is a $4.651 billion company today with a one-year return of -31.2%. Let's look at its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio to gauge whether or not it's a good investment.
The company's P/E ratio of 23.55 is 134.80% higher than the industry average of 10.03. That's not good. A company's P/E ratio shows its price as a multiple of its earnings per share (EPS). A relatively high P/E ratio is generally an indicator that a company is overvalued.
HollyFrontier Corporation's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 5.789 is 76.50% lower than its industry average of 24.63. That's good.
A company's EV/FCF ratio measures its enterprise value (market cap adjusted for cash holdings and debt) against its free cash flow (how much money the company has after all of its cash outflows). A low EV/FCF ratio indicates that a company is performing efficiently, managing its debt well, and maintaining a strong cash position.
The debt-to-equity (D/E) ratio of HollyFrontier Corporation has increased by 11.30% over the last year. That's not good.
A company's D/E ratio equals its total liabilities divided by its shareholder equity. It's a measure of a company's financial leverage. A declining D/E ratio indicates that a company is decreasing its debt burden over time, while a rising ratio indicates that a company is taking on more debt over time.
HollyFrontier Corporation has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Bonanza Creek Energy (NYSE: BCEI) is a $343.38 million company today with a one-year return of -30.77%. Judging by its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio, is it a good investment?
The company's P/E ratio of 2.237 is 79.48% lower than the industry average of 10.9. That's good.
Bonanza Creek Energy's enterprise-value-to-free-cash-flow (EV/FCF) ratio of -26.61 is below zero. That's not good.
The debt-to-equity (D/E) ratio of Bonanza Creek Energy has decreased by 23.38% over the last year. That's good.
Bonanza Creek Energy has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.
WPX Energy (NYSE: WPX) is a $3.177 billion company today with a one-year return of -53.04%. Is it a good value based on its price-to-earnings (P/E) ratio, its enterprise-value-to-free-cash-flow (EV/CF) ratio, and its debt-to-equity ratio?
The company's P/E ratio of 16.77 is 53.85% higher than the industry average of 10.9. That's not good.
WPX Energy's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 401.42 is 2448.70% higher than its industry average of 15.75. Not a good sign.
The debt-to-equity (D/E) ratio of WPX Energy has increased by 8.34% over the last year. That's not good.
WPX Energy has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
To summarize, we believe HollyFrontier Corporation (NYSE: HFC) is slightly overvalued, Bonanza Creek Energy (NYSE: BCEI) is a good value, and WPX Energy (NYSE: WPX) is very overvalued.
Editor's Note: Looking for a set of energy investments that are always a great value? Our research team tracks a lucrative set of evergreen oil ETFs in a free, continuously updated report. Simply enter your email below to claim your copy.
The Best Free Investment You''ll Ever Make Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.