Pioneer Natural Resources Company (PXD) stock climbed 10.6 % this afternoon. According to our metrics, the company seems fairly valued at today's prices. In the below analysis, we will put Pioneer Natural Resources Company's valuation in the context of its strong growth indicators and mixed market sentiment, which are also strong drivers for share price.
Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The large-cap Energy company is based in Irving, United States and has 2,076 full time employees.
PXD Has a Higher P/E Ratio Than the Sector Average
Compared to the Energy sector's average of 7.54, Pioneer Natural Resources Company has a trailing twelve month price to earnings (P/E) ratio of 10.1 and an expected P/E ratio of 9.8. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $23.54 or forward earnings per share of $24.37.
Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Pioneer Natural Resources Company's P/E ratio is higher than its sector average of 7.54, we can deduce that the market is overvaluing the company's earnings.
Pioneer Natural Resources Company Has a Negative Rate of Expected Growth
P/E ratios are falling out of favor as a means of valuing stocks for a number of reasons. Earnings are subject to manipulation, and the P/E ratio is static in time, in the sense that it doesn't take into account expected long term growth of the company. Although estimated long terms growth rates are just as easily manipulable as earnings, dividing Pioneer Natural Resources Company's P/E ratio by its expected growth rate can tell us the relative market valuation of the company in relation to expected earnings growth.
The resulting metric, called price to earnings growth (PEG) is -2.57 for Pioneer Natural Resources Company. Since the PEG ratio is negative and the company's reported earnings per share are positive, we can deduce that the company's expected growth rate is negative. Needless to say, this is a red flag for investors with a long term horizon.
PXD Has an Average P/B Ratio
Traditionally, stock pickers used to focus primarily on finding issues that were trading significantly below their tangible asset value, to guarantee themselves a margin of safety. But such an approach would screen out many valuable securities because many profitable businesses -- especially those that heavily leverage information technology -- simply do not have many tangible assets compared to more capital intensive companies.
Therefore, modern value investors tend to focus less on absolute price to book value (P/B) ratios. Instead of singling out stocks with a P/B ratio of less than 1, they will compare the target company against its peer group. For Pioneer Natural Resources Company, the P/B value is 2.52 while the average for the Energy sector is 1.68.
PXD's Weak Cash Flow Generation Is Troubling
The table below shows that Pioneer Natural Resources Company is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Pioneer Natural Resources Company's case, free cash flow is growing at an average rate of 0.0% with a coefficient of variability of 11277652799.4%. We can also see that cash flows from operations are evolving at a 0.0% rate, versus 0.0%:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023-02-23 | 11,348,000 | -3,666,000 | 15,014,000 | 147.1 |
| 2022-02-22 | 6,046,000 | -30,000 | 6,076,000 | 63.11 |
| 2021-03-01 | 2,070,000 | -1,655,000 | 3,725,000 | -39.78 |
| 2020-02-24 | 3,115,000 | -3,071,000 | 6,186,000 | -11.94 |
| 2019-02-26 | 3,242,000 | -3,783,000 | 7,025,000 | 58.26 |
| 2018-02-20 | 2,090,000 | -2,349,000 | 4,439,000 |
Pioneer Natural Resources Company Is Not a Profitable Business
If you are looking to make PXD a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Pioneer Natural Resources Company's management may be able to make the business profitable in the future.
Pioneer Natural Resources Company's Gross Margins
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023-02-23 | 24,294,000 | -10,157,000 | 57 | 21.28 |
| 2022-02-22 | 14,643,000 | -7,827,000 | 47 | 34.29 |
| 2021-03-01 | 6,685,000 | -4,315,000 | 35 | -18.6 |
| 2020-02-24 | 9,325,000 | -5,346,000 | 43 | -12.24 |
| 2019-02-26 | 9,415,000 | -4,785,000 | 49 | -12.5 |
| 2018-02-20 | 5,455,000 | -2,398,000 | 56 |
Pioneer Natural Resources Company's Operating Margins
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023-02-23 | 24,294,000 | -3,870,000 | 42 | 82.61 |
| 2022-02-22 | 14,643,000 | -3,492,000 | 23 | 666.67 |
| 2021-03-01 | 6,685,000 | -2,172,000 | 3 | -82.35 |
| 2020-02-24 | 9,325,000 | -2,392,000 | 17 | -32.0 |
| 2019-02-26 | 9,415,000 | -2,313,000 | 25 | 31.58 |
| 2018-02-20 | 5,455,000 | -2,047,000 | 19 |
Pioneer Natural Resources Company's cost of revenue is growing at a rate of -0.0% in contrast to -17.5% for operating expenses. Sales revenues, on the other hand, have experienced a 0.0% growth rate. As a result, the average gross margins growth is 0.3 and the average operating margins growth rate is 14.3, with coefficients of variability of 17.3% and 59.0% respectively.
Pioneer Natural Resources Company Benefits From Positive Market Signals
The market sentiment regarding Pioneer Natural Resources Company is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $332.0 to $225.0. PXD is trading -9.6% away from its target price of $262.92. 1.4% of the company's shares are tied to short positions, and 86.5% of the shares are held by institutional investors.
| Date Reported | Holder | Percentage | Shares | Value |
|---|---|---|---|---|
| 2023-06-30 | Vanguard Group Inc | 9% | 19,902,000 | $4,730,406,821 |
| 2023-06-30 | Blackrock Inc. | 7% | 15,703,486 | $3,732,483,031 |
| 2023-06-30 | State Street Corporation | 7% | 15,266,884 | $3,628,709,286 |
| 2023-06-30 | Capital International Investors | 4% | 8,506,616 | $2,021,895,003 |
| 2023-06-30 | Massachusetts Financial Services Co. | 3% | 7,446,302 | $1,769,874,272 |
| 2023-06-30 | JP Morgan Chase & Company | 2% | 5,706,416 | $1,356,329,473 |
| 2023-06-30 | Capital World Investors | 2% | 5,620,741 | $1,335,965,810 |
| 2023-06-30 | Primecap Management Company | 2% | 4,903,856 | $1,165,573,001 |
| 2023-06-30 | Geode Capital Management, LLC | 2% | 4,371,116 | $1,038,948,695 |
| 2023-06-30 | Invesco Ltd. | 2% | 3,857,823 | $916,946,650 |
