Today is Monday, February 10, 2020, and this is your daily energy stocks roundup. Today we’re looking at the valuations of Enterprise Products Partners LP (NYSE: EPD), Callon Petroleum Company (NYSE: CPE), and Diamondback Energy (NASDAQ: FANG).
Enterprise Products Partners LP (NYSE: EPD)
Enterprise Products Partners LP (NYSE: EPD) is a $55.67 billion company today with a one-year return of -7.89%. 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 12.23 is 18.52% lower than the industry average of 15.01. That’s good. A company’s P/E ratio shows its price as a multiple of its earnings per share (EPS). A relatively low P/E ratio is generally an indicator that a company is undervalued.
Enterprise Products Partners LP’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 38.83 is 26.40% higher than its industry average of 30.72. 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 Enterprise Products Partners LP has increased by 28.77% 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.
Enterprise Products Partners LP has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Callon Petroleum Company (NYSE: CPE)
Callon Petroleum Company (NYSE: CPE) is a $1.109 billion company today with a one-year return of -62.89%. 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 2.718 is 66.22% lower than the industry average of 8.045. That’s good.
Callon Petroleum Company’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -14.04 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of Callon Petroleum Company has increased by 4.76% over the last year. That’s not good.
Callon Petroleum Company has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Diamondback Energy (NASDAQ: FANG)
Diamondback Energy (NASDAQ: FANG) is a $11.65 billion company today with a one-year return of -24.21%. 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 10.48 is 30.27% higher than the industry average of 8.045. That’s not good.
Diamondback Energy’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -7.608 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of Diamondback Energy has decreased by 13.79% over the last year. That’s good.
Diamondback Energy 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 Enterprise Products Partners LP (NYSE: EPD) is slightly overvalued, Callon Petroleum Company (NYSE: CPE) is slightly overvalued, and Diamondback Energy (NASDAQ: FANG) is slightly overvalued.
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