Value
6.3/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 2.2 |
| P/S | 0.0 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 9.9 |
| PEG | 10.0 |
- ▸Forward P/E: 5.6x
- ▸PEG: 0.30
TPL · Why this verdict
Why Texas Pacific Land (TPL) 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 score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The forward price-to-earnings ratio of 5.0x combined with a forward-to-trailing ratio of 0.10x signals that analyst forward estimates may have been built on elevated recent commodity prices, creating mean-reversion risk in earnings that the current valuation does not adequately price. Bear case | Forward earnings estimates are revised lower by less than 15% in aggregate over the next 12 months, confirming that royalty income is more durable than a simple spot-price extrapolation would suggest. | →Stable |
| CounterTexas Pacific Land's revenue is diversified across water services, easements, and oil royalties, providing some protection against single-commodity price swings; the wide moat may sustain earnings better than commodity-company comparisons imply. | ||
Texas Pacific Land has a return on equity of 36%, operating margins of 60%, a Piotroski F-Score of 8 out of 9, and a wide economic moat score of 7.5, ranking it best in class among energy sector peers on both return metrics and quality dimensions. Quality breakdown | Return on equity stays above 25% and operating margins remain above 50% over the next 4 quarters. | →Stable |
| CounterRoyalty and surface rights businesses are fundamentally commodity-price dependent; if oil and gas prices decline materially, both royalty revenues and the equity returns that underpin the quality scores will compress regardless of the moat. | ||
The company missed earnings estimates in three of the last four quarters with an average negative surprise of -21.0%, including a -50.2% miss in Q1 2026 when actual earnings were $1.79 versus an expected $3.60, indicating that analyst models have been systematically too optimistic. Earnings | EPS surprise returns above 0% in at least 2 of the next 3 quarters as analyst estimates are reset to more achievable levels. | →Stable |
| CounterThe most recent quarter delivered a small beat of +2.47%, which could signal the turning point where analyst estimates have been adequately reset; one quarter of beats does not confirm a trend but may indicate stabilization. | ||
With 52% of revenues tied to oil and gas royalties, Texas Pacific Land's cash flows are meaningfully correlated to hydrocarbon price cycles, meaning an energy price downturn would reduce royalty income even though the surface acreage itself retains value. Risk breakdown | Non-royalty revenue streams, including water services and easements, grow to represent more than 55% of total revenues within 12 months. | →Stable |
| CounterRoyalty streams are leverage to production volumes rather than pure commodity prices, meaning even in lower-price environments, growing Permian Basin production could sustain royalty income above levels implied by spot price declines. | ||
The forward price-to-earnings ratio of 5.0x combined with a forward-to-trailing ratio of 0.10x signals that analyst forward estimates may have been built on elevated recent commodity prices, creating mean-reversion risk in earnings that the current valuation does not adequately price.
→StableBear case
- Expectation
- Forward earnings estimates are revised lower by less than 15% in aggregate over the next 12 months, confirming that royalty income is more durable than a simple spot-price extrapolation would suggest.
CounterTexas Pacific Land's revenue is diversified across water services, easements, and oil royalties, providing some protection against single-commodity price swings; the wide moat may sustain earnings better than commodity-company comparisons imply.
Texas Pacific Land has a return on equity of 36%, operating margins of 60%, a Piotroski F-Score of 8 out of 9, and a wide economic moat score of 7.5, ranking it best in class among energy sector peers on both return metrics and quality dimensions.
→StableQuality breakdown
- Expectation
- Return on equity stays above 25% and operating margins remain above 50% over the next 4 quarters.
CounterRoyalty and surface rights businesses are fundamentally commodity-price dependent; if oil and gas prices decline materially, both royalty revenues and the equity returns that underpin the quality scores will compress regardless of the moat.
The company missed earnings estimates in three of the last four quarters with an average negative surprise of -21.0%, including a -50.2% miss in Q1 2026 when actual earnings were $1.79 versus an expected $3.60, indicating that analyst models have been systematically too optimistic.
→StableEarnings
- Expectation
- EPS surprise returns above 0% in at least 2 of the next 3 quarters as analyst estimates are reset to more achievable levels.
CounterThe most recent quarter delivered a small beat of +2.47%, which could signal the turning point where analyst estimates have been adequately reset; one quarter of beats does not confirm a trend but may indicate stabilization.
With 52% of revenues tied to oil and gas royalties, Texas Pacific Land's cash flows are meaningfully correlated to hydrocarbon price cycles, meaning an energy price downturn would reduce royalty income even though the surface acreage itself retains value.
→StableRisk breakdown
- Expectation
- Non-royalty revenue streams, including water services and easements, grow to represent more than 55% of total revenues within 12 months.
CounterRoyalty streams are leverage to production volumes rather than pure commodity prices, meaning even in lower-price environments, growing Permian Basin production could sustain royalty income above levels implied by spot price declines.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Texas Pacific Land Corporation is an exceptionally high-quality royalty business with a Piotroski F-Score of 8 out of 9, 60% operating margins, and a wide economic moat built on its irreplaceable Permian Basin surface acreage, but the stock has missed earnings estimates in three of the last four quarters and faces a commodity-cycle risk where forward earnings may be built on elevated energy prices that are poised to mean-revert.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 10.0 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 8.8 |
| FCF quality | 0.0 |
| Moat | 7.5 |
| Rule of 40 | 3.0 |
| Piotroski F | 8.9 |
- ▸Excellent ROE: 36%
- ▸Strong margins: 60%
- ▸Earnings quality RED FLAG: -11% FCF/NI
- ▸Wide economic moat
Growth
6.7/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 7.7 |
| EPS growth | 5.7 |
- ▸Strong growth: 21% YoY
Momentum
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.7 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.8 |
| Analyst rating | 5.0 |
| Price target | 6.4 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $1,575,626 (0.006% of mkt cap)
Peer rank
4.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 0.3 |
| quality rank | 9.7 |
| growth rank | 6.8 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.7 |
| support resistance | 3.9 |
| 52w position | 4.9 |
Risk (lower is worse)
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.8 |
| days to cover | 1.1 |
| volatility | 1.1 |
| put call | 4.4 |
| implied vol | 3.0 |
| beta | 9.4 |
| debt equity | 4.7 |
- ▸High IV: 62%
- ▸Concentration risks: 1 HIGH, 2 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 5.2 |
| news activity | 8.0 |
- ▸Earnings concerns: 1B/3M
- ▸Dividend: 59.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:7.5>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:32d clear
- SEMI_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-0.5=NEGATIVE
- MATERIALS_CYCLE_PEAK:fwd=5.6x,ratio=0.10x
Warning (0)
none
Reward-to-Risk
-0.49
Upside
-7.1%
Downside
14.4%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 63, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.5=NEGATIVE, MATERIALS_CYCLE_PEAK:fwd=5.6x,ratio=0.10x) reinforce the read. Current asymmetry R:R is -0.49 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 7.8, Momentum at 7.5, and Growth at 6.7; the weakest are Technical at 3.8, Catalyst at 3.9, and Risk (lower is worse) at 4.2. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of -0.49 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Best In Class Quality And Moat
Trip ifReturn on equity falls below 20% or operating margins fall below 45% for 2 consecutive quarters, signaling the quality moat is failing to protect returns.
- P2Commodity Cycle Peak Valuation Risk
Trip ifAnalyst forward earnings estimates are revised lower by more than 30% in aggregate, indicating severe commodity mean-reversion is being priced into models.
- P3Earnings Miss Streak
Trip ifEPS surprise falls below -25% in at least 2 of the next 4 quarters, confirming the miss streak is structural rather than temporary.
- P4Oil Royalty Concentration Risk
Trip ifWTI crude oil prices fall below $55 per barrel for more than 60 consecutive days, reducing royalty income materially below current run-rate levels.