Devon Energy Corp/De (NYSE: DVN)

Sector: Energy Industry: Oil & Gas E&P CIK: 0001090012
Market Cap 18.80 Bn
P/B 0.88
P/E 3.24
P/S 1.91
ROIC (Qtr) 12.96
Div Yield % 2.02
Rev 1y % (Qtr) 7.63
Total Debt (Qtr) 8.55 Bn
Debt/Equity (Qtr) 0.56
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About

Investment thesis

Bull case

  • Strong operating cash flow of 6.84B provides robust 0.80x coverage of total debt 8.55B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 30.47B provides 3.56x coverage of total debt 8.55B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 6.84B provides exceptional 129.08x coverage of minority interest expenses 53M, showing strong core operations.
  • Operating cash flow of 6.84B provides exceptional 14.52x coverage of interest expenses 471M, showing strong debt service capability.
  • Operating cash flow of 6.84B provides strong 67.73x coverage of stock compensation 101M, indicating sustainable incentive practices.

Bear case

  • Operating cash flow of 6.84B barely covers its investment activities of (3.47B), with a coverage ratio of -1.97, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 6.84B provides thin coverage of dividend payments of (613M) with a -11.16 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (3.47B) provide weak support for R&D spending of 50M, which is -69.32x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • High receivables of 1.83B relative to inventory of 361M (5.08 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 3.98B show weak coverage of depreciation charges of 3.68B, with a 1.08 ratio indicating high capital intensity and potential reinvestment needs.

Adjustments For Change In Accounting Principle Breakdown of Revenue (2017)

Peer comparison

Companies in the Oil & Gas E&P
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 COP Conocophillips 136.62 Bn 17.10 2.22 23.44 Bn
2 CNQ Canadian Natural Resources Ltd 85.21 Bn 17.67 3.04 12.51 Bn
3 EOG Eog Resources Inc 66.33 Bn -60.48 8.67 8.13 Bn
4 FANG Diamondback Energy, Inc. 49.64 Bn -2,818.83 314.47 16.24 Bn
5 OXY Occidental Petroleum Corp /De/ 37.18 Bn 15.36 2.56 22.88 Bn
6 WDS Woodside Energy Group Ltd 34.64 Bn 11.73 2.51 -
7 TPL Texas Pacific Land Corp 29.74 Bn 126.16 78.66 0.02 Bn
8 DVN Devon Energy Corp/De 18.80 Bn 3.24 1.91 8.55 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.78 1.02
EV to Cash from Ops. EV/CFO 4.50 18.21
EV to Debt EV to Debt 2.84 54.57
EV to EBIT EV/EBIT 3.04 29.98
EV to EBITDA EV/EBITDA 4.27 19.64
EV to Free Cash Flow [EV/FCF] EV/FCF -17.44 39.33
EV to Market Cap EV to Market Cap 1.29 1.57
EV to Revenue EV/Rev 2.47 11.47
Price to Book Value [P/B] P/B 0.88 2.97
Price to Earnings [P/E] P/E 3.24 -25.98
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 4.44 26.80
Dividend Payout Ratio % Div Payout % (Qtr) 22.10 31.86
Dividend per Basic Share Div per Share (Qtr) 0.94 0.78
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 17.72 1.05
Interest Coverage Int. cover (Qtr) 8.44 -4.97
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 52.48 -533.65
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 89.05 52.06
Dividend Growth (1y) % Div 1y % (Qtr) -53.00 -5.45
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -15.67 6.14
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 1.82 105.89
EBIT Growth (1y) % EBIT 1y % (Qtr) -13.03 75.94
EBT Growth (1y) % EBT 1y % (Qtr) -17.62 17.44
EPS Growth (1y) % EPS 1y % (Qtr) -21.40 3.07
FCF Growth (1y) % FCF 1y % (Qtr) 628.57 -43.36
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.19 149.32
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.56 0.33
Cash Payout Ratio Cash Payout (Qtr) 0.06 0.07
Cash Ratio Cash Ratio (Qtr) 0.32 1.32
Current Ratio Curr Ratio (Qtr) 0.96 2.37
Debt to Equity Ratio Debt/Equity (Qtr) 0.56 0.34
Interest Cover Ratio Int Coverage (Qtr) 8.44 -4.97
Times Interest Earned Times Interest Earned (Qtr) 8.44 -4.97
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 43.80 16.19
EBIT Margin % EBIT Margin % (Qtr) 22.76 -16.83
EBT Margin % EBT Margin % (Qtr) 20.07 -24.06
Gross Margin % Gross Margin % (Qtr) 47.10 58.92
Net Profit Margin % Net Margin % (Qtr) 15.60 -28.75