Permianville Royalty Trust Stock Shows Every Sign Of Being Significantly Overvalued
- By GF Value
The stock of Permianville Royalty Trust (NYSE:PVL, 30-year Financials) is estimated to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $1.59 per share and the market cap of $52.5 million, Permianville Royalty Trust stock shows every sign of being significantly overvalued. GF Value for Permianville Royalty Trust is shown in the chart below.
Because Permianville Royalty Trust is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Permianville Royalty Trust has a cash-to-debt ratio of 0.09, which ranks worse than 76% of the companies in Oil & Gas industry. Based on this, GuruFocus ranks Permianville Royalty Trust's financial strength as 4 out of 10, suggesting poor balance sheet. This is the debt and cash of Permianville Royalty Trust over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Permianville Royalty Trust has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $7.5 million and earnings of $0.225 a share. Its operating margin of 98.80% better than 100% of the companies in Oil & Gas industry. Overall, GuruFocus ranks Permianville Royalty Trust's profitability as fair. This is the revenue and net income of Permianville Royalty Trust over the past years: