How Does Newfield Exploration’s Valuation Compare to Its Peers?



Newfield Exploration’s valuation

In the previous parts of this series, we compared Newfield Exploration’s (NFX) EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple against its historical levels. Now let’s compare the company’s valuation to its peers.

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A peer group comparison shows that Newfield Exploration’s forward EV-to-EBITDA multiple of ~12x is slightly undervalued compared to its peer average of 12.6x. Cimarex Energy (XEC) is currently trading at a forward EV-to-EBITDA multiple of ~15.4x.

Diamondback Energy (FANG) is trading at a multiple of ~15.8x. Energen (EGN) is trading at a lower multiple of ~7.2x.

The above companies make up ~6% of the iShares US Oil & Gas Exploration & Production ETF (IEO).

Returns and dividends

NFX offers the best returns when its profitability is scaled by its shareholder equity. This is called ROE (return on equity). Newfield Exploration’s ROE stands at about -1%, which comes as a result of the company’s negative net earnings.

Among Newfield Exploration’s peers, Cimarex Energy offers the worst returns in terms of ROE at -65%.

In terms of more direct returns to shareholders, NFX offers no dividends as opposed to Cimarex Energy and Energen, which have dividend yields of ~0.5% and 0.12%, respectively.

Should NFX be a part of your portfolio?

NFX’s relatively better stock performance is notable, and its stock increased by 10% YoY. The company has managed to keep its YoY EBITDA decline relatively low compared to its peers, while simultaneously reducing its debt. NFX can be considered a relatively cheap stock..

Now, let’s examine what’s been driving Newfield Exploration’s stock performance.


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