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Energy stocks, such as SandRidge Mississippian Trust I and Hugoton Royalty Trust, are trading at a value below what they may actually be worth. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. If you’re looking for capital gains in your next investment, I suggest you take a look at my list of potentially undervalued stocks.
SandRidge Mississippian Trust I (NYSE:SDT)
SandRidge Mississippian Trust I, a statutory trust, holds royalty interests in specified oil and natural gas properties located in the Mississippian formation in Alfalfa, Garfield, Grant, and Woods counties in Oklahoma. SandRidge Mississippian Trust I was formed in 2010 and with the stock’s market cap sitting at USD $22.08M, it comes under the small-cap category.
SDT’s shares are now hovering at around -69% beneath its value of $2.62, at a price tag of US$0.80, according to my discounted cash flow model. signalling an opportunity to buy the stock at a low price. Additionally, SDT’s PE ratio is trading at around 3.67x relative to its Oil and Gas peer level of, 13.23x suggesting that relative to other stocks in the industry, SDT’s stock can be bought at a cheaper price. SDT is also a financially healthy company, with current assets covering liabilities in the near term and over the long run. SDT also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Interested in SandRidge Mississippian Trust I? Find out more here.
Hugoton Royalty Trust (NYSE:HGT)
Hugoton Royalty Trust operates as an express trust in the United States It holds 80% net profits interests in certain gas-producing working interest properties in Kansas, Oklahoma, and Wyoming. Hugoton Royalty Trust was formed in 1998 and with the market cap of USD $31.24M, it falls under the small-cap stocks category.
HGT’s shares are currently floating at around -44% beneath its true value of $1.42, at the market price of US$0.80, based on its expected future cash flows. This difference in price and value gives us a chance to buy low. In addition to this, HGT’s PE ratio stands at around 6.96x compared to its Oil and Gas peer level of, 13.23x indicating that relative to its peers, we can buy HGT’s stock at a cheaper price today. HGT is also a financially healthy company, with short-term assets covering liabilities in the near future as well as in the long run. HGT also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. More on Hugoton Royalty Trust here.
ECA Marcellus Trust I (NYSE:ECT)
ECA Marcellus Trust I owns royalty interests in producing and development horizontal natural gas wells for Energy Corporation of America (ECA). ECA Marcellus Trust I was founded in 2010 and has a market cap of USD $36.09M, putting it in the small-cap stocks category.
ECT’s stock is now floating at around -51% under its real value of $4.17, at a price of US$2.05, based on its expected future cash flows. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. In terms of relative valuation, ECT’s PE ratio is around 6.17x while its Oil and Gas peer level trades at, 13.23x implying that relative to its competitors, you can buy ECT for a cheaper price. ECT is also robust in terms of financial health, with current assets covering liabilities in the near term and over the long run. ECT has zero debt on its books as well, meaning it has no long term debt obligations to worry about. More detail on ECA Marcellus Trust I here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks. Or create your own list by filtering companies based on fundamentals such as intrinsic discount, health score and future outlook using this free stock screener.
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.