Today is Monday, March 9, 2020, and this is your daily energy stocks roundup. Today we’re looking at the valuations of Kinder Morgan (NYSE: KMI), Cenovus Energy (NYSE: CVE), and Vermillion Energy (NYSE: VET).
Kinder Morgan (NYSE: KMI)
Kinder Morgan (NYSE: KMI) is a $36.81 billion company today with a one-year return of -3.35%. 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 16.93 is 27.87% higher than the industry average of 13.24. 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.
Kinder Morgan’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 31.24 is 11.25% higher than its industry average of 28.08. 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 Kinder Morgan has decreased by 8.03% 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.
Kinder Morgan has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Cenovus Energy (NYSE: CVE)
Cenovus Energy (NYSE: CVE) is a $3.367 billion company today with a one-year return of -29.63%. 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 2.056 is 70.58% lower than the industry average of 6.989. That’s good.
Cenovus Energy’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 7.718 is 26.28% lower than its industry average of 10.47. That’s good.
The debt-to-equity (D/E) ratio of Cenovus Energy has decreased by 33.49% over the last year. That’s good.
Cenovus Energy has scored favorably on 3 of our 3 valuation metrics. With this in mind, we believe the stock is a great value.
Vermillion Energy (NYSE: VET)
Vermillion Energy (NYSE: VET) is a $719.99 million company today with a one-year return of -70.29%. 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 29.52 is 298.06% higher than the industry average of 7.416. That’s not good.
Vermillion Energy’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 11.76 is 9.19% higher than its industry average of 10.77. Not a good sign.
The debt-to-equity (D/E) ratio of Vermillion Energy has increased by 23.04% over the last year. That’s not good.
Vermillion Energy has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
To summarize, we believe Kinder Morgan (NYSE: KMI) is slightly overvalued, Cenovus Energy (NYSE: CVE) is a great value, and Vermillion Energy (NYSE: VET) is very overvalued.
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