Value
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.1 |
| P/S | 6.9 |
| EV/EBITDA | 6.7 |
| Fwd P/E | 7.4 |
| PEG | 4.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 16.8x
- ▸PEG: 2.57
KRP · Why this verdict
Why Kimbell Royalty Partners (KRP) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue declined 7% year-over-year, placing the partnership at the weaker end of its peer group on growth, and the oldest reported quarter delivered a miss of more than 100% below the estimate before two subsequent beats — underscoring the earnings volatility inherent in commodity-linked royalties. Growth breakdown | Revenue returns to positive year-over-year growth for 2 consecutive quarters. | →Stable |
| CounterRoyalty partnerships grow not through operations but through bolt-on acreage acquisitions; a single strategic deal can reverse a revenue decline rapidly, and the earnings estimate revision trend — up 7.5% in 30 days — suggests analysts may already be pricing a recovery. | ||
Oil sales account for 62% of revenue, creating a concentrated and direct exposure to crude prices that can overwhelm the royalty model's structural advantages when the commodity cycle turns down. Bear case | Oil's share of total revenue falls below 45% as natural gas or other commodity royalties grow to a larger portion of the mix, or crude oil sustains above $65 per barrel for 12 months. | →Stable |
| CounterAs a royalty owner with no operating costs on its acreage, the partnership's break-even oil price is materially lower than that of an operating producer — the concentration risk is real but substantially cushioned by the cost-free nature of the royalty structure. | ||
Analyst earnings estimates have risen 7.5% in the past 30 days, and two of the past three quarters delivered positive surprises of 55.9% and 32.9%, suggesting the business has been outperforming a consensus set in a weaker commodity environment. Catalyst breakdown | Earnings estimates continue trending upward and the next quarterly result delivers a positive EPS surprise of at least 10%. | →Stable |
| CounterThe most recent quarter came in at the estimate (effectively flat with no surprise), suggesting the beat streak may be stalling precisely as estimates are being revised higher — setting up for a potential disappointment if oil prices soften from current levels. | ||
Free cash flow runs at 278% of net income, gross margins stand at 24%, and the Piotroski financial strength score of 7 out of 9 reflects a business that converts royalty economics into cash at a rate well above most operating peers. Quality breakdown | Free cash flow conversion remains above 150% of net income and gross margins stay above 20% for the next four quarters. | →Stable |
| CounterThe distribution yield has been flagged as potentially unsafe, suggesting the free cash flow conversion rate may reflect timing differences or structural items rather than stable, covered payouts — a sustained decline in oil prices could compress royalty cash flows faster than the conversion ratio implies. | ||
Revenue declined 7% year-over-year, placing the partnership at the weaker end of its peer group on growth, and the oldest reported quarter delivered a miss of more than 100% below the estimate before two subsequent beats — underscoring the earnings volatility inherent in commodity-linked royalties.
→StableGrowth breakdown
- Expectation
- Revenue returns to positive year-over-year growth for 2 consecutive quarters.
CounterRoyalty partnerships grow not through operations but through bolt-on acreage acquisitions; a single strategic deal can reverse a revenue decline rapidly, and the earnings estimate revision trend — up 7.5% in 30 days — suggests analysts may already be pricing a recovery.
Oil sales account for 62% of revenue, creating a concentrated and direct exposure to crude prices that can overwhelm the royalty model's structural advantages when the commodity cycle turns down.
→StableBear case
- Expectation
- Oil's share of total revenue falls below 45% as natural gas or other commodity royalties grow to a larger portion of the mix, or crude oil sustains above $65 per barrel for 12 months.
CounterAs a royalty owner with no operating costs on its acreage, the partnership's break-even oil price is materially lower than that of an operating producer — the concentration risk is real but substantially cushioned by the cost-free nature of the royalty structure.
Analyst earnings estimates have risen 7.5% in the past 30 days, and two of the past three quarters delivered positive surprises of 55.9% and 32.9%, suggesting the business has been outperforming a consensus set in a weaker commodity environment.
→StableCatalyst breakdown
- Expectation
- Earnings estimates continue trending upward and the next quarterly result delivers a positive EPS surprise of at least 10%.
CounterThe most recent quarter came in at the estimate (effectively flat with no surprise), suggesting the beat streak may be stalling precisely as estimates are being revised higher — setting up for a potential disappointment if oil prices soften from current levels.
Free cash flow runs at 278% of net income, gross margins stand at 24%, and the Piotroski financial strength score of 7 out of 9 reflects a business that converts royalty economics into cash at a rate well above most operating peers.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 150% of net income and gross margins stay above 20% for the next four quarters.
CounterThe distribution yield has been flagged as potentially unsafe, suggesting the free cash flow conversion rate may reflect timing differences or structural items rather than stable, covered payouts — a sustained decline in oil prices could compress royalty cash flows faster than the conversion ratio implies.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Kimbell Royalty Partners operates a high-quality royalty business with exceptional free cash flow conversion and strong margins, but revenue has declined 7% year-over-year, price momentum has failed to clear the required threshold, and a 62% concentration in oil sales leaves the partnership directly exposed to commodity-cycle swings — a combination that warrants caution despite the improving near-term earnings estimate trend.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.1 |
| ROA | 3.8 |
| Gross margin | 10.0 |
| Op margin | 7.5 |
| Net margin | 10.0 |
| Current ratio | 7.9 |
| FCF quality | 10.0 |
| Moat | 5.4 |
| Rule of 40 | 9.3 |
| Piotroski F | 7.8 |
- ▸Strong margins: 24%
- ▸Excellent cash conversion: 278% FCF/NI
- ▸No competitive moat
- ▸Rule of 40: 59 (pass)
Growth
0.4/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.8 |
| EPS growth | 0.0 |
- ▸Declining revenue: -7%
Momentum
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.1 |
| MACD | 2.6 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 0.2 |
- ▸Oversold in uptrend (RSI 28)
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.5 |
| Price target | 8.7 |
| erm sentiment | 8.0 |
- ▸Light analyst coverage (5.0) — signal dampened
- ▸Analyst upside: 31%
- ▸Estimates rising as sentiment proxy (+7.5%)
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
2.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.0 |
| quality rank | 5.9 |
| growth rank | 2.1 |
Technical
8.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.0 |
| support resistance | 9.4 |
| 52w position | 8.3 |
Risk (lower is worse)
8.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.9 |
| days to cover | 8.4 |
| volatility | 7.3 |
| put call | 10.0 |
| implied vol | 7.4 |
| beta | 10.0 |
| debt equity | 7.3 |
- ▸Concentration risks: 1 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 8.5 |
| earnings history | 5.6 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 4.8 |
- ▸Estimates up 7.5% (30d)
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- ASYMMETRY:2.8>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:3.2<4.5
Warning (0)
none
Reward-to-Risk
2.82
Upside
+14.1%
Downside
5.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $1.6B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.0 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Technical at 8.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.2<4.5) reinforce the read. Current asymmetry R:R is 2.82 — supplementary context, not the trigger for this path.
The strongest dimensions are Technical at 8.6, Risk (lower is worse) at 8.5, and Sentiment at 7.6; the weakest are Growth at 0.4, Peer rank at 2.2, and Momentum at 3.2. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of 2.82 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Cash Conversion
Trip ifFree cash flow conversion falls below 100% of net income for 2 consecutive quarters.
- P2Revenue Decline Growth Absent
Trip ifRevenue growth turns positive above 5% year-over-year for 2 consecutive quarters.
- P3Oil Commodity Concentration
Trip ifOil's share of total revenue falls below 40% for 2 consecutive quarters.
- P4Rising Earnings Estimates
Trip ifEarnings estimates are revised down more than 10% over any 30-day period, or the next quarterly result misses by more than 15%.