Growth vs. Fair Value
Growth vs. Fair Value
On a number of your "recommended" companies, FANG for instance, their current prices are not that far from their fair value in percentage terms. Why would I want to invest in Fang where, according to you, there may only be 10% or so upside when I could invest in another that you suggest may have 50-100% upside or more? In fact, why would you still be recommending it in a growth portfolio whereas you dropped Swn which, even after their announcement, may have a much greater upside? It is somewhat confusing. Thx.
Re: Growth vs. Fair Value
Good question. Obviously, what you invest in is up to you.
Diamondback Energy (FANG) is a "darling" of the Wall Street gang. That is worth something.
My valuation is 14X CFPS, one of the highest multiples in the Sweet 16. It deserves a high multiple because it has a very strong balance sheet and some very good Permian Basin acreage.
Go to the forecast model for FANG, which you can find on the EPG website under the Sweet 16 tab. On it you will see a red box that shows First Call's CFPS forecast.
First Call now says CFPS will ramp up to more than $15/share by 2018. My valuation formula only uses CFPS for 2015 + 2016.
In other words, FANG has a lot of "upside" priced in already. It may deserve it, but my valuation method doesn't go out that far.
After the Sweet 16 release Q4 actuals, I will roll forward my valuation models to 2017. That should increase FANG's valuation.
Diamondback Energy (FANG) is a "darling" of the Wall Street gang. That is worth something.
My valuation is 14X CFPS, one of the highest multiples in the Sweet 16. It deserves a high multiple because it has a very strong balance sheet and some very good Permian Basin acreage.
Go to the forecast model for FANG, which you can find on the EPG website under the Sweet 16 tab. On it you will see a red box that shows First Call's CFPS forecast.
First Call now says CFPS will ramp up to more than $15/share by 2018. My valuation formula only uses CFPS for 2015 + 2016.
In other words, FANG has a lot of "upside" priced in already. It may deserve it, but my valuation method doesn't go out that far.
After the Sweet 16 release Q4 actuals, I will roll forward my valuation models to 2017. That should increase FANG's valuation.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Growth vs. Fair Value
and then there is the fact its value will go up with crude. also, as crude grows fang et al's rate of growth will accelerate.
Re: Growth vs. Fair Value
Raymond James is forecasting that WTI will back to $70/bbl by year-end. If I use that oil price in my 2017 forecasts when I roll the models forward, all of the valuations for the companies in the newsletter model portfolios will go way up.
FANG is a pure play on the Permian Basin. So are CPE, CXO, LPI, PE, REI and RSPP
The Delaware Basin and Midland Basin are sub-basins of the larger Permian Basin.
FANG is a pure play on the Permian Basin. So are CPE, CXO, LPI, PE, REI and RSPP
The Delaware Basin and Midland Basin are sub-basins of the larger Permian Basin.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Growth vs. Fair Value
Setliff, they all will go up if oil does.
Re: Growth vs. Fair Value
you bet, but I think its "when".