Dan,
Can you give some detail on how you select the multiply you apply to CFPS to arrive at the estimated fair value ? For instance the forecasts use a multiple of 3.5 for CPE and 6.5 for ESTE. I am guessing PV10 and debt are considered, but what about more subjective factors like management and location? And what others things are taken into account ? thanks.
Actually all of these go into my SWAG of what a fair value multiple should be for each company.
> Strong Balance Sheet and access to capital is big
> Production / Proven Reserve growth rate < Primary reason for ESTE's higher multiple
> Production mix / ngas and NGLs are now a lot more important
> "Running Room" / lots of high value development drilling locations < Why my valuation of CRK is so much higher than First Call's price target
> Quality of the management team
> Outlook for growth + free cash flow generation now very big
> Last but sometimes not least, just my gut feeling about the company.
The Sweet 16 is currently trading at just 3.95 X operating cash flow for 2021 and at a forward PE ratio of just 6.52 X based on my 2022 earnings per share forecasts. Those are INSANE low multiples for a group of this quality.
thanks.