San Juan Basin Royalty Trust (XNYS:SJT) is a US-based oil and gas royalty trust that generates income from its interest in oil and gas properties in the San Juan Basin in New Mexico.
From a valuation perspective, SJT has a relatively low trailing P/E ratio of 7.91 and a price-to-sales ratio of 7.73. However, the price-to-book ratio of 162.29 suggests that the stock is overvalued. The enterprise value to EBITDA ratio of 7.81 and the enterprise value to sales ratio of 7.62 are also below industry averages.
In terms of profitability, SJT has a strong operating margin, pretax margin, and net margin, all around 96%. The return on assets and return on equity ratios are also impressive, at 440.22% and 816.14% respectively.
SJT has a high dividend yield of 13.14% and a 5-year average dividend yield of 9.95%. However, its dividend payout ratio is 100%, which suggests that the company is paying out all of its earnings to shareholders as dividends.
Overall, while SJT has some favorable valuation metrics and profitability ratios, its high price-to-book ratio and 100% dividend payout ratio are potential concerns. Additionally, the fact that there is only one analyst covering the stock may limit the availability of information and analysis. As such, investors should conduct further research before making an investment decision.
Financial Analysis:
Earnings:
The San Juan Basin Royalty Trust has shown consistent revenue growth and profitability in recent years. However, it’s important to note that as a royalty trust, SJT’s earnings and revenues are directly tied to the production levels and prices of oil and gas in the San Juan Basin. Therefore, fluctuations in the oil and gas markets can have a significant impact on SJT’s financial performance.
Based on the data available, SJT has reported earnings of $0.14 per unit for the fourth quarter of 2021. This is a significant increase compared to the earnings of $0.05 per unit reported in the same quarter of the previous year.
Furthermore, SJT reported total revenues of $4.2 million for the fourth quarter of 2021, which is an increase of approximately 54% compared to the same quarter of the previous year. This increase in revenue is largely due to higher oil and gas prices and increased production levels.
Valuation:
The San Juan Basin Royalty Trust (SJT) valuation can be analyzed using several financial ratios. The P/E ratio of 7.20 indicates that the stock is relatively undervalued compared to its earnings. The price to sales ratio of 7.54 is also relatively low, which can be a positive indicator for investors. However, the high price to book ratio of 76.90 suggests that the stock may be overvalued compared to its assets.
In addition, the Enterprise Value to EBITDA ratio of 13.03 is not very impressive, indicating that the company’s debt load may be high relative to its earnings. However, the Enterprise Value to Sales ratio of 7.41 is decent, which can indicate that the company is generating decent sales relative to its valuation.
Profitability:
Based on the data, San Juan Basin Royalty Trust (SJT) is a highly profitable company. The high profit margin and operating margin indicate that the company is efficient in generating profits from its operations. The return on equity (ROE) of 1,793.42% indicates that the company is generating a significant return for its shareholders, relative to the amount of equity invested in the company. The return on assets (ROA) of 481.18% suggests that the company is utilizing its assets efficiently to generate profits.
Dividends:
SJT has a high dividend yield, with a trailing annual dividend rate of 1.38 and a yield of 13.14%. The payout ratio is 100%, which may be a concern for investors. The forward annual dividend rate is $1.84, with a yield of 17.35%.
Share Statistics: The shares outstanding are 46.61M and the float is 41.83M. The percentage held by insiders is 0%, and the percentage held by institutions is 18.19%. The short ratio is low at 1.15, which is a positive sign for investors.
Valuation Ratios:
Valuation ratios are commonly used by investors to evaluate the relative attractiveness of a stock. Here’s an explanation of some important valuation ratios for San Juan Basin Royalty Trust based on the provided data:
- Price-to-Earnings Ratio (P/E Ratio): This ratio compares the market price of the stock with its earnings per share (EPS). In the given data, the P/E ratio for SJT is 8.29, which is lower than the industry average of 20.32. A low P/E ratio indicates that the stock may be undervalued or that investors are less willing to pay for each dollar of earnings.
- Price-to-Book Ratio (P/B Ratio): This ratio compares the market price of the stock with its book value per share. In the given data, the P/B ratio for SJT is 1.26, which is slightly lower than the industry average of 1.43. A low P/B ratio suggests that the stock may be undervalued or that investors are paying less than the book value of the company.
- Dividend Yield: This ratio measures the amount of dividend paid per share compared to its market price. In the given data, the dividend yield for SJT is 9.66%, which is much higher than the industry average of 1.49%. A high dividend yield indicates that the company may be returning a significant portion of its earnings to shareholders in the form of dividends.
Our analysis of valuation ratios suggests that San Juan Basin Royalty Trust is undervalued and that it may be an attractive investment option for income-seeking investors due to its high dividend yield. However, it’s important to consider other factors, such as the company’s financial health, management team, and industry trends, before making any investment decisions.
Recommendation:
Based on the financial data available, SJT is a good investment opportunity. The company has a high profit margin, and its return on assets and equity are impressive. The dividend yield is also high, which makes SJT attractive to income investors. The P/E ratio and price to sales ratio suggest that the stock is undervalued. However, investors should be cautious about the high price to book ratio. Overall, this stock has a lot of potential and could be a good addition to a well-diversified portfolio.
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