QEP Resources, Inc. – Value Analysis (FRANKFURT:Q8Q) : December 27, 2017

Capitalcube gives QEP Resources, Inc. a score of 36.

Our analysis is based on comparing QEP Resources, Inc. with the following peers – Questerre Energy Corporation Class A, Royal Dutch Shell Plc Class A and Prospex Oil and Gas Plc (QEC-NO, R6C-DE and PXOG-GB).

Investment Outlook

QEP Resources, Inc. has a fundamental score of 36 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (0.62) than its peer median (1.65).
  • Q8Q-DE‘s EBITDA-based price multiple implies slower growth than its peers despite its current comparatively high EBITDA-based returns.
  • Q8Q-DE‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Q8Q-DE‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • While Q8Q-DE‘s revenues growth in recent years has been around the peer median, the stock’s below peer median Price/EBITDA ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • Q8Q-DE seems too levered to raise additional debt.

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Leverage & Liquidity

Q8Q-DE would seem to have a hard time raising additional debt.

  • With debt at a relatively high 61.30% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 27.50%), and relatively tight interest coverage level of -0.78x, Q8Q-DE would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • Of the 3 chosen peers for the company, only 2 of the stocks have an outstanding debt balance. Companies with no debt include PXOG-GB.

Q8Q-DE has maintained its Limited Flexibility profile from the recent year-end.

  • Q8Q-DE‘s interest coverage has increased 2.20 points from last year’s low but is still below its five-year average interest coverage of 0.15.
  • The increase in its interest coverage to -0.78x from -2.98x (in 2016) was also accompanied by an increase in its peer median during this period to 1.68x from -0.57x.
  • Q8Q-DE‘s debt-EV is its highest relative to the last five years and compares to a low of 33.88% in 2016.
  • While its debt-EV increased to 61.30% from 33.88% (in 2016), its peer median decreased during this period to 27.50% from 30.70%.
  • Relative to peers, debt-EV rose 30.61 percentage points.

Access the detailed analysis for QEP Resources, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Questerre Energy Corporation Class A N/A 0.74 -4.07 35.36
Royal Dutch Shell Plc Class A 27.5 1.23 4.13 42.66
Prospex Oil and Gas Plc 0 14.6 No interest exp 999
QEP Resources, Inc. 61.3 1.55 -0.78 29.72
Peer Median 27.5 1.39 1.68 39.01
Best In Class 27.5 14.6 No interest exp 999

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Company Profile

QEP Resources, Inc. is a holding company, which engages in the exploration and production of oil and natural gas properties. It focuses in two regions of the United States: the Northern Region (primarily in North Dakota, Wyoming and Utah) and the Southern Region (primarily in Texas and Louisiana). The company was founded on May 18, 2010 and is headquartered in Denver, CO.


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