NYSE:SM: good value for what you're paying.

Last update: Mar 7, 2024

SM ENERGY CO (NYSE:SM) has caught the attention of our stock screener as a great value stock. NYSE:SM excels in profitability, solvency, and liquidity, all while being very reasonably priced. Let's delve into the details.

Deciphering NYSE:SM's Valuation Rating

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NYSE:SM was assigned a score of 7 for valuation:

A Price/Earnings ratio of 7.49 indicates a rather cheap valuation of SM.
68.22% of the companies in the same industry are more expensive than SM, based on the Price/Earnings ratio.
SM's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 25.81.
Based on the Price/Forward Earnings ratio of 7.78, the valuation of SM can be described as very cheap.
SM's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. SM is cheaper than 74.30% of the companies in the same industry.
SM's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 21.87.
Based on the Enterprise Value to EBITDA ratio, SM is valued a bit cheaper than 73.36% of the companies in the same industry.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of SM indicates a somewhat cheap valuation: SM is cheaper than 62.15% of the companies listed in the same industry.
SM has a very decent profitability rating, which may justify a higher PE ratio.
SM's earnings are expected to grow with 16.14% in the coming years. This may justify a more expensive valuation.

Looking at the Profitability

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NYSE:SM, the assigned 7 is a significant indicator of profitability:

SM has a Return On Assets of 12.82%. This is in the better half of the industry: SM outperforms 68.69% of its industry peers.
SM has a Return On Equity of 22.62%. This is in the better half of the industry: SM outperforms 65.89% of its industry peers.
SM has a Return On Invested Capital of 13.52%. This is in the better half of the industry: SM outperforms 69.63% of its industry peers.
The 3 year average ROIC (22.74%) for SM is well above the current ROIC(13.52%). The reason for the recent decline needs to be investigated.
The Profit Margin of SM (34.45%) is better than 75.23% of its industry peers.
SM's Profit Margin has improved in the last couple of years.
Looking at the Operating Margin, with a value of 38.70%, SM is in the better half of the industry, outperforming 69.63% of the companies in the same industry.
In the last couple of years the Operating Margin of SM has grown nicely.
SM has a Gross Margin of 76.26%. This is amongst the best in the industry. SM outperforms 82.24% of its industry peers.
In the last couple of years the Gross Margin of SM has grown nicely.

How do we evaluate the Health for NYSE:SM?

ChartMill utilizes a Health Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of liquidity and solvency ratios, both in absolute terms and in comparison to industry peers. NYSE:SM has earned a 6 out of 10:

Looking at the Altman-Z score, with a value of 2.47, SM is in the better half of the industry, outperforming 67.76% of the companies in the same industry.
SM has a debt to FCF ratio of 3.32. This is a good value and a sign of high solvency as SM would need 3.32 years to pay back of all of its debts.
SM's Debt to FCF ratio of 3.32 is fine compared to the rest of the industry. SM outperforms 64.02% of its industry peers.
SM has a Debt/Equity ratio of 0.44. This is a healthy value indicating a solid balance between debt and equity.
SM has a Current ratio of 1.45. This is in the better half of the industry: SM outperforms 63.55% of its industry peers.
SM has a Quick ratio of 1.45. This is in the better half of the industry: SM outperforms 68.69% of its industry peers.

Analyzing Growth Metrics

ChartMill assigns a Growth Rating to every stock. This score ranges from 0 to 10 and evaluates the different growth aspects like EPS and Revenue, both in the past as in the future. NYSE:SM scores a 4 out of 10:

The Earnings Per Share has been growing by 187.86% on average over the past years. This is a very strong growth
The Earnings Per Share is expected to grow by 16.14% on average over the next years. This is quite good.

Our Decent Value screener lists more Decent Value stocks and is updated daily.

Check the latest full fundamental report of SM for a complete fundamental analysis.

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.