There is something about a cheap-looking stock price that seems to tempt investors. When a stock gets down below $5 it’s hard not to think about how easy it would be for that stock to double into a $10 stock and still look cheap. Savvy investors will of course realize that a $5 stock could actually be a very expensive stock. You can often find a stock trading at over $100 per share that is cheap while one trading below $5 can be ridiculously expensive. That being said, sometimes stocks are beaten down so badly by the market that there are some great values to be found.
In the energy sector there are several interesting energy stocks currently selling for $5 a share or less. However, when you compare the values, there is just one that takes the crown of the best stock to buy. To get a better idea of value you have to drill down deeper and that’s where a company’s enterprise value comes into play. Here’s a look at the enterprise values of five popular energy stocks trading for $5 a share or less.
|Company||Stock Price||Shares Outstanding||Current Market Cap||Net Debt||Enterprise Value*||Debt/EV|
|SandRidge Energy Inc. (NYSE:SD)||$4.82||477,826,000||$2.3 billion||$1.8 billion||$4.1 billion||44.99%|
|Abraxas Petroleum Corp. (NASDAQ:AXAS)||$2.24||93,260,000||$208.9 million||$127.5 million||$336.4 million||37.90%|
|Quicksilver Resources Inc (NYSE:KWK)||$2.23||171,830,000||$383.2 million||$2.0 billion||$2.5 billion||83.99%|
|Magnum Hunter Resources Corp(NYSE:MHR)||$3.91||168,900,000||$660.4 million||$658.3 million||$1.5 billion||43.15%|
|Halcon Resources Corp (NYSE:HK)||$5.21||383,560,000||$2.0 billion||$2.5 billion||$4.5 billion||55.58%|
We can make plenty of observations from the above chart as several numbers really jump out. Quicksilver Resources Inc (NYSE:KWK) really stands out for how much debt the company has on its balance sheet not just when compared to its peers but in terms of its total enterprise value. That alone might not make it the best stock to buy, as too much debt adds to a company’s risk. That’s why it’s important to see how much debt adds to the overall enterprise value of the companies on this list. Abraxas has the least amount of leverage on the list while Quicksilver Resources Inc (NYSE:KWK) and Halcon have taken on more leverage.