Energy companies, such as SandRidge Permian Trust, trading at a market price below their true values are considered to be undervalued. There’s a few ways you can measure the value of a company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
SandRidge Permian Trust (NYSE:PER)
SandRidge Permian Trust holds royalty interests in specified oil and natural gas properties in the Permian Basin located in Andrews County, Texas. The company was established in 2011 and has a market cap of USD $128.63M, putting it in the small-cap group.
PER’s shares are now hovering at around -61% below its true value of $6.33, at a price of US$2.50, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. Furthermore, PER’s PE ratio is trading at 5.48x compared to its Oil and Gas peer level of, 13.78x implying that relative to its competitors, you can buy PER for a cheaper price. PER is also strong financially, with near-term assets able to cover upcoming and long-term liabilities. PER has zero debt on its books as well, meaning it has no long term debt obligations to worry about. More detail on SandRidge Permian Trust here.
Hallador Energy Company (NASDAQ:HNRG)
Hallador Energy Company, through its subsidiaries, engages in the mining, production, and sale of steam coal for the electric power generation industry in the United States. Started in 1949, and now run by Brent Bilsland, the company now has 742 employees and has a market cap of USD $224.07M, putting it in the small-cap category.
HNRG’s shares are currently hovering at around -59% below its actual level of $18.27, at a price tag of US$7.47, according to my discounted cash flow model. This mismatch indicates a chance to invest in HNRG at a discounted price. In addition to this, HNRG’s PE ratio stands at around 8.28x relative to its Oil and Gas peer level of, 13.78x suggesting that relative to its competitors, we can buy HNRG’s stock at a cheaper price today. HNRG is also strong financially, with current assets covering liabilities in the near term and over the long run.
More on Hallador Energy here.
Seadrill Partners LLC (NYSE:SDLP)
Seadrill Partners LLC owns, operates, and acquires offshore drilling units in the United States, Angola, Thailand, Canada, Equatorial Guinea, Nigeria, Indonesia, Ghana, and internationally. Founded in 2012, and currently headed by CEO Mark Morris, the company provides employment to 1,199 people and has a market cap of USD $297.50M, putting it in the small-cap category.
SDLP’s shares are currently hovering at around -88% beneath its true level of $27.02, at a price tag of US$3.29, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy SDLP shares at a discount. Also, SDLP’s PE ratio is around 3.72x against its its Energy Services peer level of, 17.37x indicating that relative to its comparable set of companies, we can invest in SDLP at a lower price. SDLP is also in great financial shape, with current assets covering liabilities in the near term and over the long run.
Continue research on Seadrill Partners here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.