Today is Tuesday, January 7, 2020, and this is your daily oil stocks roundup. Today we’re looking at the valuations of Canadian Natural Resources (NYSE: CNQ), Continental Resources (NYSE: CLR), and Concho Resources (NYSE: CXO).
Canadian Natural Resources (NYSE: CNQ)
Canadian Natural Resources (NYSE: CNQ) is a $37.7 billion company today with a one-year return of 25.26%. 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 12.55 is 28.02% higher than the industry average of 9.803. 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.
Canadian Natural Resources’ enterprise-value-to-free-cash-flow (EV/FCF) ratio of 17.63 is 20.34% higher than its industry average of 14.65. 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 Canadian Natural Resources has increased by 9.38% 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.
Canadian Natural Resources has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
Continental Resources (NYSE: CLR)
Continental Resources (NYSE: CLR) is a $13.19 billion company today with a one-year return of -20.24%. 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 16.99 is 101.49% higher than the industry average of 8.432. That’s not good.
Continental Resources’ enterprise-value-to-free-cash-flow (EV/FCF) ratio of 132.09 is 390.31% higher than its industry average of 26.94. Not a good sign.
The debt-to-equity (D/E) ratio of Continental Resources has decreased by 15.22% over the last year. That’s good.
Continental Resources has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Concho Resources (NYSE: CXO)
Concho Resources (NYSE: CXO) is an $18.48 billion company today with a one-year return of -17.99%. 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 14.45 is 1.37% lower than the industry average of 14.65. That’s good.
Concho Resources’ enterprise-value-to-free-cash-flow (EV/FCF) ratio of -36.21 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of Concho Resources has decreased by 3.10% over the last year. That’s good.
Concho Resources 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 Canadian Natural Resources (NYSE: CNQ) is very overvalued, Continental Resources (NYSE: CLR) is slightly overvalued, and Concho Resources (NYSE: CXO) is a good value.
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