Equity offering plans put Permian Resources in focus

Permian Resources (PR) has drawn fresh attention after filing a US$700.26 million shelf registration for 33,000,000 Class A common shares, in connection with an employee stock ownership plan related offering.

After the shelf registration news and recent bylaw changes, the stock has pulled back, with a 30 day share price return of down 11%, even though the year to date share price return is up 36.6% and the 1 year total shareholder return sits at 60.29%. This points to longer term momentum outweighing the latest dip.

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With the stock down over the past month but up strongly over the past year, and trading about 31% below the average analyst price target, you have to ask: is Permian Resources undervalued, or is the market already pricing in future growth?

Most Popular Narrative: 21.3% Undervalued

According to a widely followed narrative by MRT23, Permian Resources' fair value is set at $25.00 per share versus the last close at $19.67, framing the current pullback against a higher long term value anchor.

Best in class Delaware Basin LOE ($5.26/Boe) and rapidly declining D&C costs (~$700/ft) create a cost of production moat against higher cost peers.

It is worth examining what kind of production profile, reinvestment rate, and margin structure are used to support that $25.00 fair value. The key assumptions sit inside this narrative, not in the headline price chart.

Result: Fair Value of $25.00 (UNDERVALUED)

However, the story can change quickly if WTI prices stay low for an extended period or if exposure to a single basin magnifies regional policy or infrastructure shocks.

Another View: Earnings Multiple Sends A Different Signal

While the user narrative sees Permian Resources as 21.3% undervalued at $25.00 per share, the current P/E of 25.4x tells a tougher story. It is higher than the fair ratio of 23.7x, the US Oil and Gas industry at 13.1x, and peers at 21.8x, which points to less room for error. How comfortable are you paying a premium for a stock already priced above these benchmarks?

Next Steps

With both risks and rewards on the table, are you comfortable with the balance of sentiment around Permian Resources, or do you want your own data based view instead? Take a closer look at the 3 key rewards and 4 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.