Today is Monday, January 6, 2020, and this is your daily oil stocks roundup. Today we're looking at the valuations of Marathon Oil Corporation (NYSE: MRO), Pioneer Natural Resources (NYSE: PXD), and Valero Energy Corporation (NYSE: VLO).
Marathon Oil Corporation (NYSE: MRO) is an $11.08 billion company today with a one-year return of -5.95%. 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 12.71 is 50.74% higher than the industry average of 8.432. 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.
Marathon Oil Corporation's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 53.63 is 99.07% higher than its industry average of 26.94. Not a good sign. 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 high EV/FCF ratio could indicate that a company is performing inefficiently, has too much debt, or is starved for cash.
The debt-to-equity (D/E) ratio of Marathon Oil Corporation has decreased by 1.75% 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 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.
Marathon Oil Corporation has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Pioneer Natural Resources (NYSE: PXD) is a $25.69 billion company today with a one-year return of 13.82%. 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 35.89 is 325.64% higher than the industry average of 8.432. That's not good.
Pioneer Natural Resources' enterprise-value-to-free-cash-flow (EV/FCF) ratio of -132.85 is below zero. That's not good.
The debt-to-equity (D/E) ratio of Pioneer Natural Resources has increased by 0.42% over the last year. That's not good.
Pioneer Natural Resources has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
Valero Energy Corporation (NYSE: VLO) is a $37.48 billion company today with a one-year return of 23.34%. 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 16.5 is 12.63% higher than the industry average of 14.65. That's not good.
Valero Energy Corporation's enterprise-value-to-free-cash-flow (EV/FCF) ratio of 12.65 is 31.92% lower than its industry average of 18.58. That's good.
The debt-to-equity (D/E) ratio of Valero Energy Corporation has increased by 9.49% over the last year. That's not good.
Valero Energy Corporation has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
To summarize, we believe Marathon Oil Corporation (NYSE: MRO) is slightly overvalued, Pioneer Natural Resources (NYSE: PXD) is very overvalued, and Valero Energy Corporation (NYSE: VLO) is slightly overvalued.
Editor's Note: Looking for a set of oil 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.
We never spam! View our Privacy Policy You'll also get our free report, "Three Oil ETFs to Buy and Hold Forever" by our resident expert Keith Kohl.