Connect with us

Business

Are Investors Wary Of Diamondback Energy, Inc. (FANG)?

Published

on

In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Diamondback Energy, Inc. (FANG) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 13.22). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Diamondback Energy, Inc, you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Diamondback Energy, Inc is currently in possession of an enterprise value of 12.04B. That number is derived from the company’s market cap (which is currently at 10.97B) minus its cash and equivalents (which currently sit at roughly 16.59M) plus its outstanding debt (now at 1.15B). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Diamondback Energy, Inc, we are talking about 829.62M. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 14.52.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Diamondback Energy, Inc, including standard forward P/E (which comes in at 19.21), trailing P/E (which comes in at 30.74), price-to-sales, as we noted above (coming in at 13.22, price-to-book (which currently sits at 2.28), and enterprise value-to-EBITDA (17.80) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Facebook, Inc. (FB) beta you simply cannot ignore

Published

on

. Stock of Facebook, Inc. (FB) opened at $177.30 and last traded at $178.41 x 200. More than 2,643,177 shares exchanged hands compared to an average daily volume of 16,216,728 shares. At the current pps, the market capitalization stands at 518.208B.

Let’s take a look at how the stock has performed this year so far. Facebook, Inc has moved -0.98% in the last 5 days or -0.68% in the last 1 month. In long-term, Facebook, Inc has changed 4.33% in 3 months and  47.94% in this year itself. Below is the chart to get a feel for the recent price action.

 

Fundamentals you simply cannot ignore

Investors try to use stocks with high beta values to quickly recoup their investments after sharp market losses. Facebook, Inc. (FB) currently has a Beta value of 1.21 . Beta is a measurement of a stock’s price fluctuations, which is often called volatility and is used by investors to gauge how quickly a stock’s price will rise or fall. A stock with a beta of greater than 1.0 is riskier and has greater price fluctuations, while stocks with beta values of less than 1.0 are steadier and generally larger companies. Beta is often measured against the S&P; 500 index. An S&P; 500 stock with a beta of 2.0 produced a 20 percent increase in returns during a period of time when the S&P; 500 Index grew only 10 percent. This same measurement also means the stock would lose 20 percent when the market dropped by only 10 percent. Next, let’s take a look at Facebook, Inc current P/E ratio. Facebook, Inc. (FB) currently has a PE ratio of 34.55. PE ratio is an important parameter to look at when trading a stock mostly because it is easy to calculate. There are a couple of ways to calculate PE ratio either by dividing share price by earnings per share or dividing the market cap by net income. It is important to note that the earnings are usually taken from the trailing twelve months (TTM). Nevertheless, P/E tells us how much an investor is willing to pay for $1 of a company’s earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

While we have already looked at Facebook, Inc beta and P/E ratio, the EPS cannot be ignored. Facebook, Inc EPS for the trailing twelve months was 5.16. Traders and investors often use earnings per share (TTM) to determine a company’s profitability for the past year. So in essence, EPS is the amount of a company’s net income per share of common stock. Earnings per share equal the company’s net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. Facebook, Inc is estimated to release its next earnings report on 12 / 2017 (N/A-Not know at this time). It would be interesting to see how the earnings fair out considering the recent developments.

The Analyst Chirp:

Facebook, Inc. (FB) has received an average target price from analysts of $207.41 amounting to a recommendation rating of Buy. That comes from 46 different analysts. Perhaps, the driver for that assessment comes from the company’s valuations. Right now, we are looking at a median price-to-earnings ratio for this calendar year of 30.44. To give a sense of trend, the same data point on the estimate for next year is currently sitting at 26.84 times earnings. Drilling down a bit further, this quarter, we are looking at an average estimate from analysts for earnings per share level of 37.00. That shift to 25.00 heading into next quarter.

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

Continue Reading

Business

Investors Should Consider Apple Inc. (AAPL) Beta Values Before Final Decision

Published

on

. Stock of Apple Inc. (AAPL) opened at $172.50 and last traded at $173.400 x 500. More than 5,069,667 shares exchanged hands compared to an average daily volume of 28,052,767 shares. At the current pps, the market capitalization stands at 886.952B.

Let’s take a look at how the stock has performed this year so far. Apple Inc has moved 2.03% in the last 5 days or 0.97% in the last 1 month. In long-term, Apple Inc has changed 9.15% in 3 months and  49.16% in this year itself. Below is the chart to get a feel for the recent price action.

 

Fundamentals you simply cannot ignore

Investors try to use stocks with high beta values to quickly recoup their investments after sharp market losses. Apple Inc. (AAPL) currently has a Beta value of 0.99 . Beta is a measurement of a stock’s price fluctuations, which is often called volatility and is used by investors to gauge how quickly a stock’s price will rise or fall. A stock with a beta of greater than 1.0 is riskier and has greater price fluctuations, while stocks with beta values of less than 1.0 are steadier and generally larger companies. Beta is often measured against the S&P; 500 index. An S&P; 500 stock with a beta of 2.0 produced a 20 percent increase in returns during a period of time when the S&P; 500 Index grew only 10 percent. This same measurement also means the stock would lose 20 percent when the market dropped by only 10 percent. Next, let’s take a look at Apple Inc current P/E ratio. Apple Inc. (AAPL) currently has a PE ratio of 18.76. PE ratio is an important parameter to look at when trading a stock mostly because it is easy to calculate. There are a couple of ways to calculate PE ratio either by dividing share price by earnings per share or dividing the market cap by net income. It is important to note that the earnings are usually taken from the trailing twelve months (TTM). Nevertheless, P/E tells us how much an investor is willing to pay for $1 of a company’s earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

While we have already looked at Apple Inc beta and P/E ratio, the EPS cannot be ignored. Apple Inc EPS for the trailing twelve months was 9.210. Traders and investors often use earnings per share (TTM) to determine a company’s profitability for the past year. So in essence, EPS is the amount of a company’s net income per share of common stock. Earnings per share equal the company’s net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. Apple Inc is estimated to release its next earnings report on 9 / 2018 (N/A-Not know at this time). It would be interesting to see how the earnings fair out considering the recent developments.

The Analyst Chirp:

Apple Inc. (AAPL) has received an average target price from analysts of $190.70 amounting to a recommendation rating of Overweight. That comes from 39 different analysts. Perhaps, the driver for that assessment comes from the company’s valuations. Right now, we are looking at a median price-to-earnings ratio for this calendar year of 15.00. To give a sense of trend, the same data point on the estimate for next year is currently sitting at 14.11 times earnings. Drilling down a bit further, this quarter, we are looking at an average estimate from analysts for earnings per share level of 32.00. That shift to 31.00 heading into next quarter.

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

Continue Reading

Business

PayPal Holdings, Inc. (PYPL) Could Be In For A Major Breakout

Published

on

. Stock of PayPal Holdings, Inc. (PYPL) opened at $74.08 and last traded at $75.39 x 200. More than 1,483,443 shares exchanged hands compared to an average daily volume of 9,389,196 shares. At the current pps, the market capitalization stands at 89.771B.

Let’s take a look at how the stock has performed this year so far. PayPal Holdings, Inc has moved 1.36% in the last 5 days or -3.87% in the last 1 month. In long-term, PayPal Holdings, Inc has changed 20.00% in 3 months and  88.90% in this year itself. Below is the chart to get a feel for the recent price action.

 

Fundamentals you simply cannot ignore

Investors try to use stocks with high beta values to quickly recoup their investments after sharp market losses. PayPal Holdings, Inc. (PYPL) currently has a Beta value of 1.21 . Beta is a measurement of a stock’s price fluctuations, which is often called volatility and is used by investors to gauge how quickly a stock’s price will rise or fall. A stock with a beta of greater than 1.0 is riskier and has greater price fluctuations, while stocks with beta values of less than 1.0 are steadier and generally larger companies. Beta is often measured against the S&P; 500 index. An S&P; 500 stock with a beta of 2.0 produced a 20 percent increase in returns during a period of time when the S&P; 500 Index grew only 10 percent. This same measurement also means the stock would lose 20 percent when the market dropped by only 10 percent. Next, let’s take a look at PayPal Holdings, Inc current P/E ratio. PayPal Holdings, Inc. (PYPL) currently has a PE ratio of 58.35. PE ratio is an important parameter to look at when trading a stock mostly because it is easy to calculate. There are a couple of ways to calculate PE ratio either by dividing share price by earnings per share or dividing the market cap by net income. It is important to note that the earnings are usually taken from the trailing twelve months (TTM). Nevertheless, P/E tells us how much an investor is willing to pay for $1 of a company’s earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

While we have already looked at PayPal Holdings, Inc beta and P/E ratio, the EPS cannot be ignored. PayPal Holdings, Inc EPS for the trailing twelve months was 1.28. Traders and investors often use earnings per share (TTM) to determine a company’s profitability for the past year. So in essence, EPS is the amount of a company’s net income per share of common stock. Earnings per share equal the company’s net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. PayPal Holdings, Inc is estimated to release its next earnings report on 12 / 2017 (N/A-Not know at this time). It would be interesting to see how the earnings fair out considering the recent developments.

The Analyst Chirp:

PayPal Holdings, Inc. (PYPL) has received an average target price from analysts of $79.77 amounting to a recommendation rating of Overweight. That comes from 47 different analysts. Perhaps, the driver for that assessment comes from the company’s valuations. Right now, we are looking at a median price-to-earnings ratio for this calendar year of 38.99. To give a sense of trend, the same data point on the estimate for next year is currently sitting at 32.26 times earnings. Drilling down a bit further, this quarter, we are looking at an average estimate from analysts for earnings per share level of 44.00. That shift to 36.00 heading into next quarter.

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

Continue Reading

 


Lithium Stocks

 

Trending