Today is Wednesday, January 8, 2020, and this is your daily oil stocks roundup. Today we’re looking at the valuations of Devon Energy Corporation (NYSE: DVN), Enbridge (NYSE: ENB), and ONEOK (NYSE: OKE).
Devon Energy Corporation (NYSE: DVN)
Devon Energy Corporation (NYSE: DVN) is a $9.748 billion company today with a one-year return of 4.5%. 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 7.931 is 5.94% lower than the industry average of 8.432. 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.
Devon Energy Corporation’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -38.97 is below zero. That’s not 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). An EV/FCF ratio below zero could indicate that one of these numbers is negative.
The debt-to-equity (D/E) ratio of Devon Energy Corporation has decreased by 3.41% 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.
Devon Energy Corporation has scored favorably on 2 of our 3 valuation metrics. With this in mind, we believe the stock is a good value.
Enbridge (NYSE: ENB)
Enbridge (NYSE: ENB) is an $80.57 billion company today with a one-year return of 18.59%. 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 18.31 is 14.15% higher than the industry average of 16.04. That’s not good.
Enbridge’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 50.81 is 18.30% higher than its industry average of 42.95. Not a good sign.
The debt-to-equity (D/E) ratio of Enbridge has decreased by 7.82% over the last year. That’s good.
Enbridge has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
ONEOK (NYSE: OKE)
ONEOK (NYSE: OKE) is a $31.64 billion company today with a one-year return of 33.33%. 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 25.3 is 64.18% higher than the industry average of 15.41. That’s not good.
ONEOK’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -27.67 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of ONEOK has increased by 49.18% over the last year. That’s not good.
ONEOK 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 Devon Energy Corporation (NYSE: DVN) is a good value, Enbridge (NYSE: ENB) is slightly overvalued, and ONEOK (NYSE: OKE) is very overvalued.
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