These Upstream Companies Have the Lowest Valuation Ratios

Top five upstream stocks by valuation

In this part, we’ll compare stocks’ adjusted EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratios. Enterprise value is the sum of a company’s market capitalization and debt, minus cash and cash equivalents. A low EV-to-EBITDA ratio indicates that a company may be undervalued. Let’s look at the five cheapest upstream stocks based on their last-12-month EV-to-EBITDA ratios as of fiscal 4Q17.

These Upstream Companies Have the Lowest Valuation Ratios

Stone Energy

Stone Energy’s (SGY) adjusted EV-to-EBITDA ratio was ~4.4x. The company’s current market capitalization is $658.4 million, and as of December 31, 2017, Stone Energy’s total outstanding debt was ~$235.5 million. The company’s LTM adjusted EBITDA as of fiscal 4Q17 totaled $145 million. SGY’s lower forward EV-to-EBITDA ratio of 2.8x suggests that its 2018 EBITDA could be higher than last year’s.

Sandridge Energy

Sandridge Energy’s (SD) adjusted EV-to-EBITDA ratio was ~4.7x. The company’s current market capitalization is $510 million, and as of December 31, 2017, its total debt was $37.5 million. SD’s LTM adjusted EBITDA as of fiscal 4Q17 totaled $164 million. Its forward EV-to-EBITDA ratio is 3.0x, meaning its EBITDA could be higher this year.

Murphy Oil

Murphy Oil’s (MUR) adjusted EV-to-adjusted EBITDA ratio was ~6.7x. Its current market capitalization is ~$4.4 billion, while its long-term debt as of December 31, 2017, was $2.9 billion. The company’s LTM adjusted EBITDA as of fiscal 4Q17 totaled $1.2 billion. MUR has a forward EV-to-EBITDA ratio of 3.9x, indicating that its EBITDA could be higher this year.

QEP Resources

QEP Resources (QEP) adjusted EV-to-EBITDA ratio was ~7x. QEP’s enterprise value comprises almost equal market capitalization and debt. Its market capitalization is currently $2.24 billion, while its long-term debt as of December 31, 2017, was $2.16 billion. QEP’s LTM adjusted EBITDA as of fiscal 4Q17 totaled ~$730 million. QEP’s forward EV-to-EBITDA ratio is 4.9x.

Southwestern Energy

Southwestern Energy’s (SWN) adjusted EV-to-adjusted EBITDA ratio was ~7.5x. Debt makes up a huge portion of SWN’s enterprise value. The company has a market capitalization of $2.5 billion, while its total debt as of December 31, 2017, was ~$4.4 billion. Its LTM adjusted EBITDA as of fiscal 4Q17 totaled ~$1.2 billion. The company’s forward EV-to-EBITDA ratio is 4.2x.