Today is Tuesday, January 14, 2020, and this is your daily oil stocks roundup. Today we’re looking at the valuations of Texas Pacific Land Trust (NYSE: TPL), Chevron Corporation (NYSE: CVX), and Encana Corporation (NYSE: ECA).
Texas Pacific Land Trust (NYSE: TPL)
Texas Pacific Land Trust (NYSE: TPL) is a $6.217 billion company today with a one-year return of 30%. 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 19.92 is 136.47% higher than the industry average of 8.424. 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.
Texas Pacific Land Trust’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 28.74 is 5.97% higher than its industry average of 27.12. 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 Texas Pacific Land Trust has stayed constant 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.
Texas Pacific Land Trust has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Chevron Corporation (NYSE: CVX)
Chevron Corporation (NYSE: CVX) is a $219.78 billion company today with a one-year return of 3.66%. 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 16.68 is 34.95% higher than the industry average of 12.36. That’s not good.
Chevron Corporation’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 14.35 is 21.02% lower than its industry average of 18.17. That’s good.
The debt-to-equity (D/E) ratio of Chevron Corporation has decreased by 9.99% over the last year. That’s good.
Chevron Corporation has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value .
Encana Corporation (NYSE: ECA)
Encana Corporation (NYSE: ECA) is a $5.573 billion company today with a one-year return of -35.46%. 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 3.516 is 63.72% lower than the industry average of 9.69. That’s good.
Encana Corporation’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 35.92 is 147.04% higher than its industry average of 14.54. Not a good sign.
The debt-to-equity (D/E) ratio of Encana Corporation has increased by 9.53% over the last year. That’s not good.
Encana 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 Texas Pacific Land Trust (NYSE: TPL) is slightly overvalued, Chevron Corporation (NYSE: CVX) is a good value, and Encana Corporation (NYSE: ECA) is slightly overvalued.
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