Today is Thursday, March 5, 2020, and this is your daily energy stocks roundup. Today we’re looking at the valuations of Magnolia Oil & Gas Corporation (NYSE: MGY), Centennial Resource Development (NASDAQ: CDEV), and Solaris Oilfield Infrastructure (NYSE: SOI).
Magnolia Oil & Gas Corporation (NYSE: MGY)
Magnolia Oil & Gas Corporation (NYSE: MGY) is a $1.797 billion company today with a one-year return of -40.27%. 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 23.67 is 191.18% higher than the industry average of 8.129. 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.
Magnolia Oil & Gas Corporation’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 14.55 is 16.14% lower than its industry average of 17.35. 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 Magnolia Oil & Gas Corporation has decreased by 5.31% 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.
Magnolia Oil & Gas Corporation has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.
Centennial Resource Development (NASDAQ: CDEV)
Centennial Resource Development (NASDAQ: CDEV) is a $520.84 million company today with a one-year return of -78.82%. 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 31.33 is 285.41% higher than the industry average of 8.129. That’s not good.
Centennial Resource Development’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -3.978 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of Centennial Resource Development has increased by 45.45% over the last year. That’s not good.
Centennial Resource Development has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
Solaris Oilfield Infrastructure (NYSE: SOI)
Solaris Oilfield Infrastructure (NYSE: SOI) is a $496.66 million company today with a one-year return of -38.03%. 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 6.367 is 70.67% lower than the industry average of 21.71. That’s good.
Solaris Oilfield Infrastructure’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 7.017 is 42.34% lower than its industry average of 12.17. That’s good.
The debt-to-equity (D/E) ratio of Solaris Oilfield Infrastructure has decreased by 100.00% over the last year. That’s good.
Solaris Oilfield Infrastructure has scored favorably on 3 of our 3 valuation metrics. With this in mind, we believe the stock is a great value.
To summarize, we believe Magnolia Oil & Gas Corporation (NYSE: MGY) is a good value, Centennial Resource Development (NASDAQ: CDEV) is very overvalued, and Solaris Oilfield Infrastructure (NYSE: SOI) is a great value.
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