We've been asking ourselves recently if the market has placed a fair valuation on Pioneer Natural Resources Company. Let's dive into some of the fundamental values of this large-cap Energy company to determine if there might be an opportunity here for value-minded investors.
Pioneer Natural Resources Company's Valuation Is in Line With Its Sector Averages:
Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 8.53 and an average price to book (P/B) ratio of 1.78. In contrast, Pioneer Natural Resources Company has a trailing 12 month P/E ratio of 10.7 and a P/B ratio of 2.31.
When we divide Pioneer Natural Resources Company's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -2.64. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Business Has Weak Operating Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $9,415 | $9,325 | $6,685 | $14,643 | $24,294 | $19,253 |
| Revenue Growth | n/a | -0.96% | -28.31% | 119.04% | 65.91% | -20.75% |
| Operating Margins | 13% | 11% | -4% | 19% | 41% | 34% |
| Net Margins | 10% | 8% | -3% | 14% | 32% | 27% |
| Net Income (MM) | $978 | $773 | -$200 | $2,118 | $7,845 | $5,106 |
| Net Interest Expense (MM) | $126 | $121 | $129 | $161 | $128 | $141 |
| Depreciation & Amort. (MM) | $1,534 | $1,711 | $1,639 | $2,498 | $2,530 | $2,742 |
| Diluted Shares (MM) | 171 | 167 | 165 | 246 | 252 | 240 |
| Free Cash Flow (MM) | $2,979 | $2,883 | $1,944 | $5,928 | $11,235 | $8,568 |
| Capital Expenditures (MM) | $263 | $232 | $126 | $118 | $113 | $129 |
| Current Ratio | 1.42 | 0.88 | 1.36 | 1.52 | 0.96 | 0.85 |
| Total Debt (MM) | $2,284 | $2,739 | $6,460 | $7,176 | $5,683 | $4,924 |
| Net Debt / EBITDA | 0.52 | 0.78 | 3.64 | 0.63 | 0.37 | 0.52 |
Pioneer Natural Resources Company has low leverage, growing revenues and decreasing reinvestment in the business, and irregular cash flows. However, the firm has weak operating margins with a positive growth rate. Finally, we note that Pioneer Natural Resources Company has positive expected EPS Growth.
