Stock Valuation: Beach Energy Ltd (BPT)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
BEACH ENERGY LTD Australia/
ASX
Energy – Oil & Gas – E&P – Oil & Gas E&P AUD1.91
@ 30 Aug 2018
COMPANY PROFILE Beach Energy Ltd is an oil and gas exploration and production company based in Adelaide, South Australia. The company holds interests in exploration and production tenements in Australia, USA, Egypt, Tanzania, Romania and New Zealand.

Beach produces oil, gas, and gas liquids from numerous joint ventures in the onshore Cooper and Eromanga basins. Beach merged with Cooper Basin joint-venture partner Drillsearch Energy Limited in March 2016. Group equity production is about 10 million barrels of oil equivalent from an equity proven and probable reserve base of 70 mmboe. Average field life is less than 10 years based on current production.With Lattice’s inclusion, production will more than double to 27-28 mmboe, but reserve life remains sub-10 years based on 232 mmboe of proven and probable reserves. We credit life of nearly 20 years assuming substantial conversion of 2C contingent resources into reserve category with drilling. Shale gas resources are blue-sky.

Stock Code BPT
Stock Valuation Below

Beach Energy Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of AUD1.91 as at 30 Aug 2018, Beach Energy Ltd is trading at a Price to Sales Ratio of 3.3 times last 12 months sales.  This is a 73.0% premium to its historical average Price to Sales Ratio of 1.9 times.
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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