Today is Tuesday, July 14, 2020, and this is your daily energy stocks roundup. Today we're looking at the valuations of Sabine Royalty Trust (NYSE: SBR), WPX Energy (NYSE: WPX), and San Juan Basin Royalty Trust (NYSE: SJT).
Sabine Royalty Trust (NYSE: SBR) is a $446.71 million company today with a one-year return of -35.75%. 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 10.75 is 4.78% higher than the industry average of 10.26. 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.
Sabine Royalty Trust's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 13.88 is 31.66% lower than its industry average of 20.31. 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 Sabine Royalty Trust has held steady over the last year. That's 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 steady or 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.
Sabine Royalty Trust 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 $3.099 billion company today with a one-year return of -51.83%. 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 15.43 is 50.39% higher than the industry average of 10.26. That's not good.
WPX Energy's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 384.99 is 1795.57% higher than its industry average of 20.31. 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.
San Juan Basin Royalty Trust (NYSE: SJT) is a $129.3 million company today with a one-year return of -67.22%. 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 15.94 is 55.36% higher than the industry average of 10.26. That's not good.
San Juan Basin Royalty Trust's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 3.713 is 81.72% lower than its industry average of 20.31. That's good.
The debt-to-equity (D/E) ratio of San Juan Basin Royalty Trust has held steady over the last year. That's good.
San Juan Basin Royalty Trust has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.
To summarize, we believe Sabine Royalty Trust (NYSE: SBR) is a good value, WPX Energy (NYSE: WPX) is very overvalued, and San Juan Basin Royalty Trust (NYSE: SJT) is a good value.
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