On Friday, Piper Sandler, a financial services firm, updated its price target for Par Petroleum (NYSE:PARR), increasing it to $47.00 from the previous $43.00, while maintaining an Overweight rating on the stock. The adjustment reflects a refreshed estimate of the mid-cycle earnings power for U.S. refiners, taking into account ongoing share buybacks.
The firm's analysis suggests that refining stocks are not overvalued despite concerns they might be pricing in another year of elevated margins for 2025. The updated view by Piper Sandler indicates that the stocks are largely discounting expected earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2025, considering the end-of-year 2025 enterprise value (EV).
According to the firm, small to mid-cap refiners show the largest discounts, with PBF Energy (NYSE:PBF) and HF Sinclair Corporation leading the group. Among the larger-cap names, Phillips 66 (NYSE:PSX) and Valero Energy (NYSE:VLO) are seen as offering the most long-term upside potential. As a result, Piper Sandler has raised its target prices across the sector to reflect higher anticipated medium-term earnings power.
Despite the positive long-term outlook, the firm notes a shift toward more cautious market sentiment in the short term. This cautious stance is attributed to the recent performance of stocks and a recognition of seasonality factors that could impact the market. Alongside Par Petroleum, Piper Sandler also increased its price targets for HF Sinclair Corporation (to $70), Marathon Petroleum Corporation (NYSE:MPC) (to $204), PBF Energy (to $61), and Phillips 66 (to $187).
InvestingPro Insights
With the spotlight on Par Petroleum following Piper Sandler's updated price target, data from InvestingPro offers additional context for investors considering the stock. The company boasts a compelling price-to-earnings (P/E) ratio of 3.18, which is even more attractive when looking at the adjusted P/E ratio for the last twelve months as of Q4 2023, sitting at 3.03. This suggests that Par Petroleum is trading at a lower multiple of its earnings compared to many peers, potentially indicating an undervalued stock.
From a growth perspective, Par Petroleum's revenue growth of 12.43% over the last twelve months is robust, and the quarterly growth rate of 20.71% for Q4 2023 is particularly impressive. Moreover, the company's operating income margin of 8.33% demonstrates its ability to convert sales into profits effectively.
For investors looking for additional insights, InvestingPro offers more tips on Par Petroleum, including an analysis of the company's profitability over the last year and a forecast on its net income trajectory. Notably, Par Petroleum has been profitable over the last twelve months, which aligns with analysts' predictions that the company will remain profitable this year. However, investors should be aware of the volatility in stock price movements and the fact that the company does not pay dividends, which may influence investment strategies. To explore further, visit https://www.investing.com/pro/PARR and use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Currently, there are 5 more InvestingPro Tips available for Par Petroleum.
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