Today is Tuesday, March 3, 2020, and this is your daily energy stocks roundup. Today we’re looking at the valuations of Williams Companies (NYSE: WMB), Pembina Pipeline Corporation (NYSE: PBA), and Earthstone Energy (NYSE: ESTE).
Williams Companies (NYSE: WMB)
Williams Companies (NYSE: WMB) is a $22.69 billion company today with a one-year return of -28.55%. 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 27.06 is 101.34% higher than the industry average of 13.44. 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.
Williams Companies’ enterprise-value-to-free-cash-flow (EV/FCF) ratio of 31.61 is 23.48% higher than its industry average of 25.6. 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 Williams Companies has increased by 9.09% 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.
Williams Companies has scored favorably on 0 of our 3 valuation metrics. With this in mind, we believe the stock is very overvalued.
Pembina Pipeline Corporation (NYSE: PBA)
Pembina Pipeline Corporation (NYSE: PBA) is a $19.98 billion company today with a one-year return of -0.98%. 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 7.08% higher than the industry average of 17.1. That’s not good.
Pembina Pipeline Corporation’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of 44.82 is 12.58% lower than its industry average of 51.27. That’s good.
The debt-to-equity (D/E) ratio of Pembina Pipeline Corporation has increased by 15.63% over the last year. That’s not good.
Pembina Pipeline Corporation has scored favorably on 1 of our 3 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
Earthstone Energy (NYSE: ESTE)
Earthstone Energy (NYSE: ESTE) is a $267.31 million company today with a one-year return of -37.01%. 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 3.022 is 62.82% lower than the industry average of 8.129. That’s good.
Earthstone Energy’s enterprise-value-to-free-cash-flow (EV/FCF) ratio of -9.6 is below zero. That’s not good.
The debt-to-equity (D/E) ratio of Earthstone Energy has increased by 205.30% over the last year. That’s not good.
Earthstone 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 Williams Companies (NYSE: WMB) is very overvalued, Pembina Pipeline Corporation (NYSE: PBA) is slightly overvalued, and Earthstone Energy (NYSE: ESTE) is slightly overvalued.
Editor’s Note: Looking for a set of energy investments that are always a great value? Our research team tracks a lucrative set of evergreen oil ETFs in a free, continuously updated report. Simply enter your email below to claim your copy.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
