SandRidge Mississippian Trust I and ECA Marcellus Trust I are energy stocks on my list that are potentially undervalued. This means their current share prices are trading well-below what the companies are actually worth. 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 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 founded in 2010 and has a market cap of USD $29.12M, putting it in the small-cap stocks category.
SDT’s shares are now trading at -55% lower than its intrinsic value of $2.58, at the market price of US$1.16, based on its expected future cash flows. The difference between value and price signals a potential opportunity to buy SDT shares at a discount. In terms of relative valuation, SDT’s PE ratio is around 5.64x against its its Oil and Gas peer level of, 14.37x meaning that relative to its peers, SDT’s stock can be bought at a cheaper price. SDT is also a financially robust company, as short-term assets amply cover upcoming and long-term liabilities. SDT also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into SandRidge Mississippian Trust I 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 established in 2010 and has a market cap of USD $35.21M, putting it in the small-cap stocks category.
ECT’s stock is now trading at -50% lower than its true level of $4.11, at a price tag of US$2.05, based on my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. Furthermore, ECT’s PE ratio is trading at 6.86x compared to its Oil and Gas peer level of, 14.37x implying that relative to its competitors, ECT’s stock can be bought at a cheaper price. ECT is also in great financial shape, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. ECT has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Continue research on ECA Marcellus Trust I here.
Höegh LNG Partners LP (NYSE:HMLP)
Höegh LNG Partners LP focuses on owning, operating, and acquiring floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters. Formed in 2014, and run by CEO Richard Tyrrell, the company size now stands at 446 people and with the market cap of USD $604.10M, it falls under the small-cap group.
HMLP’s shares are now trading at -35% lower than its true value of $29.09, at a price of US$18.95, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy HMLP shares at a discount. Also, HMLP’s PE ratio is trading at 13.47x relative to its Oil and Gas peer level of, 14.37x implying that relative to other stocks in the industry, you can purchase HMLP’s stock for a lower price right now. HMLP is also a financially robust company, with current assets covering liabilities in the near term and over the long run. It’s debt-to-equity ratio of 112.98% has been diminishing for the past few years indicating its capability to pay down its debt. Interested in Höegh LNG Partners? Find out more 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.