Undervalued energy companies, such as Chesapeake Granite Wash Trust and Pacific Coast Oil Trust, trade at a price less than their true values. 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.
Chesapeake Granite Wash Trust (NYSE:CHKR)
Chesapeake Granite Wash Trust owns royalty interests in the oil and natural gas properties located in the Colony Granite Wash play in Washita County in the Anadarko Basin of Western Oklahoma. Chesapeake Granite Wash Trust was formed in 2011 and has a market cap of USD $74.80M, putting it in the small-cap group.
CHKR’s shares are now floating at around -66% beneath its true value of $4.69, at a price tag of US$1.60, according to my discounted cash flow model. The discrepancy signals an opportunity to buy low. Furthermore, CHKR’s PE ratio stands at 5.42x against its its Oil and Gas peer level of, 14.23x suggesting that relative to its comparable company group, we can buy CHKR’s stock at a cheaper price today. CHKR is also robust in terms of financial health, with short-term assets covering liabilities in the near future as well as in the long run. CHKR also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Continue research on Chesapeake Granite Wash Trust here.
Pacific Coast Oil Trust (NYSE:ROYT)
Pacific Coast Oil Trust acquires and holds net profits and royalty interests in various oil and natural gas properties located in California. Pacific Coast Oil Trust was started in 2012 and with the market cap of USD $80.64M, it falls under the small-cap category.
ROYT’s shares are now trading at -32% less than its actual level of $3.06, at a price tag of US$2.09, according to my discounted cash flow model. This discrepancy signals a potential opportunity to buy ROYT shares at a low price. Moreover, ROYT’s PE ratio stands at around 10.89x relative to its Oil and Gas peer level of, 14.23x meaning that relative to its comparable set of companies, ROYT’s shares can be purchased for a lower price. ROYT is also strong financially, as current assets can cover liabilities in the near term and over the long run. ROYT has zero debt on its books as well, meaning it has no long term debt obligations to worry about. Continue research on Pacific Coast Oil Trust here.
SandRidge Mississippian Trust II (NYSE:SDR)
SandRidge Mississippian Trust II holds royalty interests in oil and natural gas properties. SandRidge Mississippian Trust II was founded in 2011 and with the stock’s market cap sitting at USD $86.52M, it comes under the small-cap category.
SDR’s shares are now trading at -44% lower than its actual level of $3.11, at a price tag of US$1.74, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy SDR shares at a discount. Moreover, SDR’s PE ratio is around 7.6x while its Oil and Gas peer level trades at, 14.23x meaning that relative to other stocks in the industry, we can buy SDR’s stock at a cheaper price today. SDR also has a healthy balance sheet, as current assets can cover liabilities in the near term and over the long run. SDR also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into SandRidge Mississippian Trust II here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.