Value
9.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.7 |
| P/S | 9.1 |
| EV/EBITDA | 7.5 |
| Fwd P/E | 10.0 |
| PEG | 10.0 |
| Analyst target | 9.0 |
- ▸Forward P/E: 3.4x
- ▸PEG: 0.48
- ▸Attractively valued
SM · Why this verdict
Why SM Energy (SM) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score6.8/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
SM Energy delivered 73% revenue growth with 1000% free cash flow conversion and beat earnings in 3 of the last 4 quarters, but trades at a forward price-to-earnings ratio of 3.6 times that may reflect commodity-cycle peak earnings which could mean-revert sharply if oil and gas prices decline.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
SM Energy generated 73% revenue growth year-over-year with free cash flow at 1000% of net income, placing it among the highest growth and strongest cash conversion names in the oil and gas exploration and production peer set. Quality breakdown | Free cash flow conversion remains above 500% of net income and revenue growth stays above 20% year-over-year over the next 12 months, confirming the growth is not a single-quarter anomaly. | →Stable |
| CounterOil and gas exploration companies frequently post extraordinary growth numbers in commodity bull cycles that are entirely reversed in the following downturn; 73% revenue growth built on a commodity price surge is not a durable competitive advantage. | ||
The forward price-to-earnings ratio of 3.6 times is so low relative to the trailing multiple that it signals earnings estimates may be built on elevated commodity prices that could mean-revert, making the apparent cheapness deceptive if forward estimates are revised down in a commodity downturn. Bear case | The forward price-to-earnings ratio remains below 8 times with no significant downward earnings estimate revisions over the next 12 months, confirming that estimates are based on sustainable rather than peak commodity prices. | →Stable |
| CounterAn oil and gas company at 3.6 times forward earnings with a rule of 40 score of 113 provides a very wide margin of safety; even if earnings decline 30%, the stock would still be cheap by most valuation frameworks. | ||
SM Energy beat analyst estimates in 3 of the last 4 quarters with an average positive surprise of 16.1%, including a 37.75% beat in the most recent quarter, demonstrating that management consistently outperforms expectations in its operational execution. Earnings | The earnings beat streak extends to at least 5 of 6 reported quarters with average surprise remaining above 10% over 12 months. | →Stable |
| CounterEarnings beats in commodity producers often reflect favorable spot price variances relative to the assumptions baked into analyst estimates rather than genuine operational outperformance; one commodity price downturn would flip this to misses. | ||
Price momentum scores only 3.4 out of 10 with falling on-balance volume, and the stock experienced a 6.2% gap down that the data flags as a potential reversal signal, suggesting the market is re-pricing the stock lower even as reported fundamentals appear strong. Momentum breakdown | The gap down reverses with price recovering above $32 and on-balance volume returning to an upward trend within 6 months. | →Stable |
| CounterA 6.2% gap down after strong earnings often reflects the sell-the-news dynamic in commodity stocks; if buyers do not emerge within 2 to 3 weeks of the gap, the technical damage may presage further downside. | ||
SM Energy generated 73% revenue growth year-over-year with free cash flow at 1000% of net income, placing it among the highest growth and strongest cash conversion names in the oil and gas exploration and production peer set.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 500% of net income and revenue growth stays above 20% year-over-year over the next 12 months, confirming the growth is not a single-quarter anomaly.
CounterOil and gas exploration companies frequently post extraordinary growth numbers in commodity bull cycles that are entirely reversed in the following downturn; 73% revenue growth built on a commodity price surge is not a durable competitive advantage.
The forward price-to-earnings ratio of 3.6 times is so low relative to the trailing multiple that it signals earnings estimates may be built on elevated commodity prices that could mean-revert, making the apparent cheapness deceptive if forward estimates are revised down in a commodity downturn.
→StableBear case
- Expectation
- The forward price-to-earnings ratio remains below 8 times with no significant downward earnings estimate revisions over the next 12 months, confirming that estimates are based on sustainable rather than peak commodity prices.
CounterAn oil and gas company at 3.6 times forward earnings with a rule of 40 score of 113 provides a very wide margin of safety; even if earnings decline 30%, the stock would still be cheap by most valuation frameworks.
SM Energy beat analyst estimates in 3 of the last 4 quarters with an average positive surprise of 16.1%, including a 37.75% beat in the most recent quarter, demonstrating that management consistently outperforms expectations in its operational execution.
→StableEarnings
- Expectation
- The earnings beat streak extends to at least 5 of 6 reported quarters with average surprise remaining above 10% over 12 months.
CounterEarnings beats in commodity producers often reflect favorable spot price variances relative to the assumptions baked into analyst estimates rather than genuine operational outperformance; one commodity price downturn would flip this to misses.
Price momentum scores only 3.4 out of 10 with falling on-balance volume, and the stock experienced a 6.2% gap down that the data flags as a potential reversal signal, suggesting the market is re-pricing the stock lower even as reported fundamentals appear strong.
→StableMomentum breakdown
- Expectation
- The gap down reverses with price recovering above $32 and on-balance volume returning to an upward trend within 6 months.
CounterA 6.2% gap down after strong earnings often reflects the sell-the-news dynamic in commodity stocks; if buyers do not emerge within 2 to 3 weeks of the gap, the technical damage may presage further downside.
Per-dimension breakdown
Quality
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.8 |
| ROA | 2.0 |
| Gross margin | 10.0 |
| Op margin | 0.0 |
| Net margin | 1.8 |
| Current ratio | 1.6 |
| FCF quality | 10.0 |
| Moat | 6.4 |
| Rule of 40 | 9.5 |
| Piotroski F | 6.7 |
- ▸Excellent cash conversion: 1000% FCF/NI
- ▸Rule of 40: 113 (elite)
Growth
10.0/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
- ▸Strong growth: 73% YoY
Momentum
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.6 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 2.3 |
- ▸Oversold in uptrend (RSI 20)
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 7.2 |
| Price target | 9.6 |
- ▸LLM news sentiment: +0.30 (n=6)
- ▸Analyst upside: 55%
Insider
6.6/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 7.8 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $834,311 (0.013% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.1 |
| quality rank | 2.6 |
| growth rank | 9.5 |
- ▸Industry growth leader
Technical
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 9.2 |
| support resistance | 9.3 |
| 52w position | 4.9 |
| gap | 6.0 |
Risk (lower is worse)
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.9 |
| days to cover | 7.8 |
| volatility | 0.0 |
| put call | 8.6 |
| implied vol | 0.0 |
| beta | 8.8 |
| debt equity | 4.5 |
| news risk | 5.0 |
- ▸High IV: 174%
Catalyst
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 6.5 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/0M
- ▸Dividend: 321.0%
How the verdict was assembled
Engine trigger
Mixed signals. Hold existing position.
Engine technical detail
verdict_path:
L4:PATH_F_HOLD_DEFAULTPassed (5)
- ASYMMETRY:2.9>=1.5
- INSIDER:OK
- NEWS_BOOST:ANALYST_CLUSTER(6)
- EARNINGS_PROXIMITY:36d clear
- SEMI_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.2<4.5
- MATERIALS_CYCLE_PEAK:fwd=3.4x,ratio=0.30x
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
2.87
Upside
+34.4%
Downside
12.0%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
The default F-path HOLD fired without any positive-conviction gate triggering — no momentum acceleration, no quality+value crossover, no setup recognition. Highest-clear gate: ASYMMETRY:2.9>=1.5. Top dim: Growth at 10.0; weakest: Momentum at 3.2. The engine's read is one of pattern absence — no directional conviction in either direction at current asymmetry.
The strongest dimensions are Growth at 10.0, Value at 9.2, and Sentiment at 7.7; the weakest are Momentum at 3.2, Peer rank at 4.5, and Quality at 4.9. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of 2.87 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1SM Energy generated 73% revenue growth year-over-year with free cash flow at 1000% of net income, placing it among the highest growth and strongest cash conversion names in the oil and gas exploration and production peer set.
Trip ifFree cash flow as a percentage of net income falls below 200% in any reported quarter, indicating the exceptional cash conversion is deteriorating.
- P2The forward price-to-earnings ratio of 3.6 times is so low relative to the trailing multiple that it signals earnings estimates may be built on elevated commodity prices that could mean-revert, making the apparent cheapness deceptive if forward estimates are revised down in a commodity downturn.
Trip ifForward EPS estimates are revised downward by more than 25% within any 60-day period.
- P3SM Energy beat analyst estimates in 3 of the last 4 quarters with an average positive surprise of 16.1%, including a 37.75% beat in the most recent quarter, demonstrating that management consistently outperforms expectations in its operational execution.
Trip ifEPS surprise falls below 0% in at least 2 of the next 4 quarters.
- P4Price momentum scores only 3.4 out of 10 with falling on-balance volume, and the stock experienced a 6.2% gap down that the data flags as a potential reversal signal, suggesting the market is re-pricing the stock lower even as reported fundamentals appear strong.
Trip ifStock price drops below $25, more than 12% below the current price of $28.47.